Sherman J. Maisel

Managing the Dollar

What is monetary policy? How is it made? What does it do? Why does it fail to do what so many want? An inside view by a former Governor of the Federal Reserve Board.

The seven governors of the Federal Reserve Board play a powerful role in guiding the nation's economy. Their decisions directly affect the amount of money in circulation, the level of interests rates, and the functioning of the banking system and credit markets. The impact of their decisions can be measured in the success or failure of thousands of businesses, in fluctuations of prices and costs, in changes in family income and wealth, and in the rise and fall of stocks and bonds. But for all their importance, the governors of the Fed are little known, and they serve an institution whose operations are understood by few.

From 1965 until 1972 Sherman J. Maisel was a governor of the Federal Reserve Board. Drawing upon that experience and his training as a professional economist, he provides in this volume the clearest view yet of the making of monetary policy. Managing the Dollar takes the reader behind the scenes into the board room where the Fed deliberates on the state of the economy, determining whether to buy or sell government securities and whether to tighten or ease money and credit. It documents the Fed's actions in times of crisis, as in 1966 when the economy spiraling upward at a dangerous pace encountered a severe credit crunch, and din 1970 when the collapse of the Penn Central threatened to set off a financial panic. The author describes how the Fed's decisions were influenced by the contrasting styles of two strong chairmen, William McChesney Martin and Arthur F. Burns, one an investment broker, the other an academic economist with wide experience in government councils.

But Mr. Maisel provides more than just history in this account. He explains the pressures that operate on the Board, the methods by which the Federal Reserve staff gathers and presents basic data on the economy, and shows how the Fed struggles to shape monetary policy in the face of uncertainty and shifting economic conditions. It is this close-up view of the Fed's operations that makes Managing the Dollar essential reading for the financial community and for all others who want to know more about the framing of monetary policy.