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The article addresses the democratization of money. The author equates the economic importance of the use of checks or deposit currency with the ability to physically distribute goods through railways. The author considers government intervention into the regulation of deposit currency, as it is beginning to replace the use of currency and coins, which are provided to the public free of charge. The author argues against the criticism that this is a socialization of the banking system by stating that this subsidy would take the place of the costs of generating paper currency and coins, and would strengthen the banking system by the increase in individual bank business.

The authors respond to comments by Professor Eugene Carter concerning their paper "A Simultaneous Equation Approach to Financial Planning." They state that while matrix inversions are utilized in solving linear simultaneous equations, their own model utilizes nonlinearities that prevent the use of a straight-forward matrix inversion technique. They suggest their own model does a more effective job of portraying financial decision making than other models. They comment on the accuracy of projections for Sears-Roebuck and mention a discussion about if the U.S. Securities and Exchange Commission should permit or require projections in equity prospecti, considering the method for making financial projections is well-developed.

The article comments on the papers "The Changing Role of U.S. Banks in International Financing," by George H. Chittenden, "The International Money Market: Structure, Scope and Instruments," by Fred H. Klopstock, and "The Integration of European Capital Markets," by Oscar L. Altman, all published within the issue. The author looks at changes occurring in European capital markets, international money markets, and commercial bank lending. The movement toward better organized markets for long-term capital in Western Europe is discussed.

The article discusses the important contribution that non-financial institutions make to money markets. The article focuses on the short-term investment practices of non-financial corporations, and outlines any changes in these practices since 1939. The article explains that, because of the significant increase in money-market investment, these investments can have a real impact on the growth of various sectors. The article addresses the determinants of types of securities held by non-financial corporations and trends in corporate short-term investment practices. The author notes that corporate portfolio managers have significant cash for investment, and market growth is evident by the number of companies selling commercial paper directly and sales changes in commercial paper houses.

A discussion of several conference papers that examined monetary policy is presented. The author notes that one of the papers offered a clear argument on the role of monetary policy in international finance. The author also explores the idea of flexible exchange rates and the problems that inflation may present. The author proposes that a deflation of income would actually solve many of the economic problems the U.S. is facing in the postwar period.

The common theme running through the three papers prepared for this session is the nature and effectiveness of the international balance-of-payments adjustment process. Klein projects the effect of exchange-rate changes on national balance-of-payments positions. Kenen assumes fixed exchange rates and simulates the effects on the U.S. balance of payments of changes in U.S. monetary and fiscal policy. Adler and Stevens analyze the relationship between foreign direct investment by U.S. firms and U.S. exports, and then use their model to simulate the effect of several kinds of policy measures (exchange-rate, tariff and tax-rate changes) on that key aspect of the adjustment process. [ABSTRACT FROM AUTHOR]

The interrelated model provides a useful framework for a time series econometric study of household behavior. This paper summarizes the discussion in a longer paper scheduled for publication. In addition, a suggested extension and some preliminary results are presented. The interrelated model is a generalization of the familiar partial adjustment model. That model suggests that net investment in any period closes some fixed proportion of the gap between desired and actual stock holdings. In the multi-asset generalization, net investment in each asset is determined by the disequilibrium in all other asset holdings, as well as its own disequilibrium. Therefore, the model explains the allocation of wealth among assets, and also the allocation of income to wealth holding as determined by the desired level of asset holding. The extension of the model discussed below restricts the model to the portfolio allocation problem for a given level of total wealth. [ABSTRACT FROM AUTHOR]

A conference paper is presented that focuses on the pricing of new automobile financing. In his research the author uses the cost of the vehicle's credit as the finance rate and argues against the criticism that this is not a measure of pure interest and opts to use the U.S. Federal Reserve System's method for estimating the finance rate. During 1952-1962 sales finance companies competed more heavily with other financial institutions and the car manufacturers' own lenders.

This article presents a discussion on several papers that examined postwar economics in the U.S. The author discusses the government bond holdings of life insurance companies and the common stock shares purchased by colleges and universities with money from endowments. The author also discusses a paper that examined some of the philosophical forces that have shaped investment activity in the U.S. The author explores how the purchasing power theory had been applied by investors in their financial decision making. The author also discusses trends in securities prices following the end of World War II.

The article presents a conference paper in response to another paper published in this same issue titled "Cost of the Marshall Plan to the United States," by Seymour E. Harris. The author notes that Harris may not have had the advantage of reading the 240 page report containing the U.S. President Harry Truman's proposals for European recovery. The author considers the role of financial measures in economic recovery, stabilization loans, and the validity of the cost estimates of the Plan.

This paper has evaluated the empirical usefulness of six different monetary aggregates for the period 1953-I through 1971-I and the two sub periods 1953-I through 1960-IV and 1961-I through 1971-I. When alternative adjustments are made for the disturbance created by the major industrial strikes of this period, it is found that changes in the narrow money stock have a greater capacity to explain movements in two different measures of income than either changes in bank credit or four broader definitions of money. Moreover, results from estimates of two alternative reduced form systems, in which changes in income are determined by changes in two monetary variables and man-days idled by strikes, also confirm that the narrow money stock was the most empirically useful monetary aggregate from 1953-I through 1971-I. [ABSTRACT FROM AUTHOR]

Why should government intervene in the housing market? Most economists approach such a question with certain preconceptions about the functioning of private markets and the grounds for public intervention. Since this paper reflects those preconceptions, it is worth stating three of them explicitly at the outset. The first is that there is a strong general case for unregulated markets; known varieties of regulation often tend to reduce efficiency or to interfere with responsiveness to shifts in supply or demand conditions, and for these reasons tend to reduce consumer satisfaction. The second is that the presence of certain market characteristics--monopoly power and externalities are perhaps the most familiar examples--greatly weakens the case for nonintervention. The third is that the presence of special goals which conflict with market outcomes may also weaken the case for unregulated markets; intervention in the labor market through a wage subsidy, for example, is one way to achieve an income redistribution goal. Economists will therefore look for an answer to the question of why government intervention in housing first of all in special characteristics which distinguish housing from other markets, and secondly in any special goals society appears to have which relate closely to housing market outcomes. Knowledge of these special characteristics and goals will help answer not only the question of why--if at all--there should be government intervention but also the question of what forms any intervention might take. These statements suggest the outline of the present paper. The section following this introduction single out two characteristics, labeled "durability" and "neighborhood effects," which distinguish the housing market from most other markets. It defines these characteristics and discusses some of their probable effects on market behavior. The following short section singles out three goals, "equal opportunity," "output stability," and "minimum ... [ABSTRACT FROM AUTHOR]

This paper, a theoretically oriented presentation, examines the social optimality of the current policy of one-hundred per cent guarantees for public agencies' debt issues. The analysis suggests and explores an alternative policy: Coordinating debt repayment with the performance of the assets underlying the debt. The limits of this alternative are analyzed under conditions of uncertainty, characterized by imperfect and expensive information. The first section of the paper will introduce the problem of socially optimal agency debt policy. The classical solution for the optimal agency behavior and its modifications, necessitated by costly imperfect information, will be the focus of the following two sections. The analysis in the next two sections will examine optimal agency policy in a state-preference world utilizing a Pareto criteria for social welfare. The final section of the paper will study the implications for agency optimality in a log utility/channel capacity information world. [ABSTRACT FROM AUTHOR]

Financial models are used extensively by the staff of the Federal Reserve Board to aid in the analysis of alternative monetary policies. The purpose of this paper is not to describe these models in detail, but rather to outline the structure of the short-term models and to discuss both how they are used and some problems that we have encountered with them. Two different financial models are used at the Federal Reserve Board: a monthly model of the money market and the money market sector of our quarterly model. A third, a weekly model, has been estimated but used only to analyze special policy questions. The models are structural in the sense that they attempt to isolate demands and supplies of a set of financial assets. While the two models differ somewhat in the assets considered, they both are used to analyze the relationships between the monetary aggregates on the one hand and interest rates and reserves on the other. Any one of these three variables can be assumed exogenous for purposes of simulation. The models are also used to analyze the effects of special policy actions such as the imposition of marginal reserve requirements on CD's. The quarterly model is well known and need not be described here. For purposes of this paper, the money market sector of the model is defined to include equations for the public's demand for currency, demand deposits, savings and time deposits, and for CD's along with commercial bank demand for free reserves and their offering rates on savings and time deposits and on CD's. Rates offered on savings deposits by thrift institutions are also included. Given the volume of bank reserves, the sector determines M[sub 1], M[sub 2], the Treasury bill rate, the CD rate and the average rate offered on savings and thrift accounts. [ABSTRACT FROM AUTHOR]

The article presents commentary from Robert Lindsay about a paper by Donald P. Jacobs and Almarin Phillips (J&P), "The Commission on Financial Structure and Regulation: Its Organization and Recommendations," which appeared in the May, 1972 issue of the "Journal of Finance." He briefly outlines his understanding of the Commission's report as reported by J&P, and then notes several questions it raises. He wonders why the Commission would permit nonbank institutions to encroach upon certain markets that are traditionally the province of banks, but not others. He is also surprised at how little the Commission's report had to say about monetary policy.

The paper is a welcome contribution to comparative economic analysis. The authors conclude that (1) general credit restraint is pervasively associated with more or less severe downturns in new construction, (2) financial stringency affects residential building disproportionately compared to other major sectors of the economy such as industrial investment, and (3) cyclical declines occur "almost regardless of prevailing institutional arrangements" for the financing of housing. Thus, the contraction of new building during tight-money periods seems to be rooted in the "nature of the beast"--the particular sensitivity of housing to changes in financial conditions. We have again learned this morning how difficult it is to specify the nature of the beast more precisely and in a form that lends itself to empirical verification. The Fisher-Siegman paper points up the unresolved issue of credit availability versus cost of funds. If this problem has so far proved to be intractable in a single country--our own--, it is compounded for comparative analysis. Professor Fair's paper stresses the failure of most U.S. housing models to separate clearly demand and supply coefficients, including the financial variables operating on the demand for housing or the supply of new construction or, for that matter, on the volume and price of existing housing offered in the market. We have still some distance to travel for a fuller understanding of the interactions between the mortgage market and the housing market, and the interactions between the mortgage market and the general capital market as well. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to make a detailed comparison of three macroeconometric models of the U.S. economy with regard to their predictive ability and policy multiplier properties. Three models are the St. Louis Model, the Wharton Model and the M.P.S. Model. These models are constructed with different emphasis on the treatment of the monetary phenomena, depending upon the philosophy of the model builder. They may respectively be called a monetarist model, a Keynesian-type income-expenditure model, and a structural model which emphasizes the monetary structure for the stabilization policy analysis. The structure of each model is not discussed in this paper but only a brief sketch of their special features is given in the next section. The predictive performance and the policy multiplier analysis are discussed in the 3rd and 4th sections, followed by some concluding remarks. [ABSTRACT FROM AUTHOR]

There are many different systems to improve the domestic payments mechanism in operation or at advanced stages of planning. This paper is an attempt to identify and describe some of the important evolving mechanisms for effecting transactions within the American economy, with particular emphasis on how their adoption is likely to affect the implementation of monetary policy. Check clearing is a large and growing business in the United States. In 1971, the Federal Reserve has reported that the annual number of checks written in the United States is about 22 billion and that this number is likely to double during the current decade. No doubt similar growth rates have been experienced in the past. At the outset it is important to understand why banks are anxious to modify the existing payments mechanism. First, stock exchange brokerage houses have given banks a most discomforting view of what can happen to financial intermediaries which ignore growing transaction volumes. [ABSTRACT FROM AUTHOR]

The housing and mortgage markets have long been considered to be markets that may not always be in equilibrium, and many econometric models of the housing and mortgage markets have tried in one way or another to account for disequilibrium effects. In this paper a critique of previous models of the housing and mortgage markets is made. The main argument of the paper is that disequilibrium effects have not been accounted for in an adequate way in most models. A related argument of the paper is that many models have not captured in an adequate way the interaction between the housing and mortgage markets. [ABSTRACT FROM AUTHOR]

Starleaf and Stephenson (S&S) have recently presented an interesting paper [8] whose central theme is similar to that of my book [2]. S&S argue that observed interest rates are strongly influenced by forces other than monetary policy actions and thus cannot be taken as a measure of the latter. I argued that the money stock, as well, is influenced by forces other than policy actions and that it, too, is thus an inappropriate indicator of policy actions. We both then advocated measures of monetary policy analogous to the full-employment surplus measure of fiscal policy; that is, measures that are independent of the business cycle except insofar as policymakers respond to the cycle. [ABSTRACT FROM AUTHOR]

This paper analyzes the role of the Federal Reserve to money markets and bank management regarding their reserves. The author outlines three goals: to test the applicability of a model that views bank borrowing from the Reserve's discount window as a buffer to short-run reserve flows; to examine how the price of Federal Funds is influenced by the eight large money market institutions; and to investigate the existence of structural changes in the market. Weekly data from 1960-1968 is used throughout the paper.

The article sheds light on commercial banking in the United States during the sixties. The article makes the conclusion that if the trends emerging in the late 1950s and in 1960 are not reversed by major changes in economic conditions or tax and regulatory policy, then the commercial banks will be unable to play as important a role in financing the 1960s as they have done in previous years. The article's conclusion is based on the expectation that in all years, except those of recession, bank deposits will continue to expand at a slower rate than the growth of the gross national product.

A conference paper is presented that provides information on U.S. Federal reserve policy from August 1945 to June 1948. The author investigates some of the major factors that have shaped the decisions of the central bank in the postwar period. Some of these issues include the management of the federal debt, the rise of monetary control mechanisms outside the control of the central bank and issues related to property management and the holding of government securities.

The article presents a critique of a study by Edward E. Edwards called "Changing Character of the Real Estate Mortgage Markets" that appears in this issue. Edwards, in his article, implies that mortgage funds are in short supply, which would impact liquidity and capital adequacy that would force savings and loan associations to leave the mortgage market. The author feels that Edwards does not prove that there is such a shortage and does not consider factors like mortgage rates or terms. The author also addresses Edwards' comments about capital requirements and says that his statement that the U.S. Federal Home Loan Bank Board restricting growth rates in capital shortage areas is erroneous.

The Robinson paper directs itself to the discussion of the research that may be done by the Bank Administration Institute on the subject of measuring the risk dimension of investment performance. It did not itself involve any empirical testing--at least at this stage of the paper. There is little one can say concerning any model or testing procedures. However, the thrust of the paper seemed to be to suggest that we should apply modern methods of measuring investment performance to specific types of portfolios--particularly pension funds and profit-sharing portfolios and to other situations as well. Secondly, although the paper states they intend to forge new frontiers in risk measurement, there appears to be a hint at a desire to fill the gap between theory and implementation. Little effort seems directed precisely at measuring risk (once the academy agrees on how it should be defined). [ABSTRACT FROM AUTHOR]

In March 1973 President Nixon suspended all federal low income housing programs and instructed the Department of Housing and Urban Development to undertake a comprehensive review of government housing programs and policies. The report of the National Housing Review, completed in October 1973, drew heavily on earlier economic analyses. Both the National Housing review and earlier studies are quite critical of existing housing programs. These studies contain a serious flaw; they give insufficient attention to the nature and extent of racial discrimination in urban housing markets and, thus they fail to consider how these effects should influence housing policy. All of the studies contain the usual obligatory references to racial segregation and comment unfavorably on the high proportion of black households living in substandard housing. None documents the extent and nature of black welfare losses attributable to racial discrimination; none points the serious distortions of the processes of urban growth and development caused by this most serious of market imperfections; and none gives serious consideration to remedies. The principal goal of this paper is to correct this oversight. In order to sharpen these distinctions, however, I first summarize the conventional economic analysis of housing markets and of existing policy, which underlie these studies. [ABSTRACT FROM AUTHOR]

Since Alexander's (1) initial contribution, there have been a variety of filter-type security-trading models employed in tests of the martingale hypothesis. However, all of these models of investor behavior have one common shortcoming--once the specific trading rule is chosen, it remains invariant across the trading horizon. Such constraints remove from the discretion of the investor the ability to change his trading rules in response to new information. This paper attempts to rectify this limitation by developing models that allow for such discretion. Since the basic question is the adjustment speed of a market stimulated by information, it is posited that some additional behavioral insight can be achieved by adding a measure of market information flow to the decision model. Concepts and measures from information and control theory have been applied to a market trading mechanism that result in substantial improvement in filter model tests of the weak form martingale hypothesis. [ABSTRACT FROM AUTHOR]

In a recent study, we examined in depth the effects of moving from fixed to competitive commissions upon NYSE member firms, investors, market efficiency, and the economy. That study found no persuasive reason to maintain the current fixed rates. The purpose of this paper is to present some of the more important empirical analyses of our study with particular reference to those results which are based upon the income and expense statements of individual NYSE firms for each of the years 1965-1970. The Securities and Exchange Commission allowed us to use their computer to perform various statistical analyses of these statements. This is the first time that any outside researchers have been given access to these files. The empirical results summarized in this current paper therefore should prove most interesting to students of financial markets. To provide an initial perspective, the paper begins with an overview of the brokerage industry and a discussion of the more important economic arguments for and against competitive commissions. Following this, cost and profit functions for individual brokerage firms are developed using two different approaches. An analysis of the major ways in which competitive commissions might affect market efficiency is then presented, again with some new statistical results. A brief conclusion ends the paper. [ABSTRACT FROM AUTHOR]

In this paper the expected utility hypothesis of choice under uncertainty, developed by Daniel Bernoulli and popularized by Friedman and Savage, is applied to the explanation of the optimal amount of life insurance for a rational individual. The empirical implications of the expected utility hypothesis for the demand for life insurance are then tested by multiple regression analysis using data for the decade of the 1960s. The theoretical model developed implies that three key cyclical variables should explain cyclical variations in the quantity of life insurance demanded: the rate of discount, the amount of nonproperty income (i.e., wages and salaries) expected to be received over the period of analysis, and the amount of nonhuman wealth held at the time the decision to purchase insurance is made. Our empirical results confirm the importance of these variables and are consistent with behavior according to the expected utility hypothesis. [ABSTRACT FROM AUTHOR]

The results of empirical studies by Friedman, Laidler, Chow, and others indicate that a weighted average of current and past values of measured income is a better explanatory variable in the demand function for money than is current measured income. There is also some empirical evidence to the effect that weighted averages of current and past interest rates (see Hamburger and Starleaf) and weighted averages of current and past values of a price index (Friedman) have more explanatory power in the demand function for money than do current interest rates and current prices. In nearly all of the empirical studies of the efficacy of distributed-lagged independent variables in the demand function for money, standard families of J-shaped weight structures have been used for the generation of the weighted-average independent variables. In fact, in most cases, a geometrically decaying weight structure has been used, and it has frequently been transformed by the method of Koyck. The purpose of this paper is to report the results of an empirical study of lag structures in the demand function for money which involved the use of Almon's technique. We also present some evidence concerning money illusion in the demand for money and the empirical appropriateness of defining money inclusive of time deposits. [ABSTRACT FROM AUTHOR]

Modern macroeconomic theories are customarily classified as either neoclassical or Keynesian. Neoclassical theories are those that assume that most markets are in equilibrium most of the time; in particular, they generally assume that the labor market is always in equilibrium. Keynesian theories are those that assume that many markets are in disequilibrium much of the time; in addition to the labor market, they generally assume that financial markets and markets for capital goods are often in disequilibrium, in this paper, we will be interested in the extent to which a theory assumes that markets are in equilibrium, rather than in the intellectual tradition of the theory, so we will classify theories as "equilibrium theories" or "disequilibrium theories." We will be interested in dynamic theories, which describe the development of prices, stocks, and flows of goods and services over time, rather than in static theories, which describe the impact of events such as a one-time change in tastes, technology, or government policy. One of the purposes of this paper is to develop an aggregate model of the development over time of an economy that includes money and that is in continual equilibrium in the sense described above. Such a model would help in the analysis of the properties of a competitive monetary economy, and would be a logical starting point for the analysis of such phenomena as unemployment and changes in the rate of inflation. Since most Keynesian models of the economy do not pretend to be equilibrium models, let us turn to the neoclassical models of economic growth. [ABSTRACT FROM AUTHOR]

This paper presents more detailed evidence on the behavior and relationships of various interest rates in the United States since the Accord of March, 1951. Spectral analytic techniques are utilized in examining (1) how rates of return on different securities of specific maturity vary through time, and (2) how rates on securities with different terms to maturity appear to be related. Spectral analysis appears especially well suited to examination of interest rate relationships since it is a mathematical tool equipped to deal specifically with the mixture of randomness and regularity typically contained in an interest rate series. As such, it yields more insights into interest rate movements and relationships than conventional techniques of analysis which depend on specified periodicities. [ABSTRACT FROM AUTHOR]

This paper traces some of the critical strands of analyses and findings produced by the Securities and Exchange Commission's institutional Investor Study in its examination of institutional trading of common stocks. First a background description of the nature of the Study and the issues which focussed attention upon institutional trading behavior is provided. In reviewing the trading impacts of institutions the paper examines the Study's analysis of the extent and nature of trading imbalances generated by institutions and the evidence produced from the Study's several analyses of price effects of institutional trading. From there the paper evaluates the role of institutional trading and of the regulatory structure in affecting the efficiency with which the market making function is performed. Finally, some impacts of the market system upon institutional trading behavior are considered. [ABSTRACT FROM AUTHOR]

The principle objective of our paper [5] was to present the theoretical concept of the Monetary Full Employment Interest Rate (MFEIR). We argued (and still believe) that this concept should be acceptable for use as an objective indicator of monetary policy by economists who believe that the Keynesian monetary mechanism is a valid description of reality. The presentation of estimates of the MFEIR was a secondary objective. As we stated, "[o]ur empirical results are presented more as an example of how this variable might be measured and used rather than as a definitive set of estimates of the monetary full employment interest rate during the 1952-1966 period." [5, p. 638]. [ABSTRACT FROM AUTHOR]

The concept of risk has so permeated the financial community that no one needs to be convinced of the necessity of including risk in investment analysis. Still of controversy is what constitutes risk and how it should be measured. This paper examines the statistical properties of one measure of risk which has had wide acceptance in the academic community: namely the coefficient of non-diversifiable risk or more simply the beta coefficient in the market model. [ABSTRACT FROM AUTHOR]

This article examines the difference between reserves and free reserves as they relate to open market operations (OMO) by the Federal Reserve System. There are two types of OMOs: defensive operations, being those transactions which are designed to offset disturbances in member bank reserves, and dynamic operations, which seek to change reserves to permit monetary expansion or contraction. The author uses regression methods to estimate the changes affecting reserves and free reserves. The paper builds upon previous research by W.G. Dewald.

This paper presents data which describe the extent to which ownership and control have been separated among the 200 largest member commercial banks. Management control has become the more common form of control among the large banks. The large banks were classified as owner controlled or if 10% of their voting stock was concentrated in a single party. If not, then they were classified as management controlled. The two major categories then were divided into subcategories reflecting levels of owner and management control.

This paper explores price-volume-credit risk relationships in the regulated small loan portion of the consumer finance industry. We seek insight into two questions which are basic to public policy decisions concerning the enactment of legal ceilings on rates, limits on loan sizes, and restrictions on entry in small loan legislation. These questions are: When legal rate ceilings are higher, do licensed small loan lenders accept poorer credit risks? When legal rate ceilings are higher, will the availability of loans (amount of loans made or outstanding) be greater or less? If the assumption of competition were applicable, the answers to these questions would be simple and direct: that licensed lenders would be forced to accept poorer credit risks and the availability of loans would be greater when legal rate ceilings are higher. The converse, of course, would be the case when legal rate ceilings are lower. In almost every state there are small loan laws which limit the price of loans and the maximum loan size. But the assumption of competition is not applicable since the regulatory philosophies applied by the states vary from fairly strict public utility-type regulation in New York to relatively free entry and high rate and loan size limits in several southern states. We turn, then, to the differences in price-volume-credit risk relationships among the states under conditions of imperfect competition to answer the two questions raised. [ABSTRACT FROM AUTHOR]

Our paper studies empirical relationships between money demand on the one hand and income and the rate of interest on the other for the United States in the post-war period, 1947-1966. Much already has been learned about the statistical properties of money demand chiefly through the pioneering work of A. J. Brown, Tobin, Latane, Friedman and Bronfenbrenner-Mayer and the more recent important studies of Christ, Meltzer, Brunner-Meltzer, Lee, Teigen, Laidler, Chow and Zarembka. But much also remains in question. Our aim is to throw light on some of the unsettled issues. [ABSTRACT FROM AUTHOR]

The purpose of Part I of this paper is to place the contribution of Guttentag-Lindsay in historical perspective and in particular to relate the entire controversy concerning the uniqueness of commercial banks to the nineteenth century dispute regarding the uniqueness of the Bank of England. My objective will be accomplished primarily by showing how closely the Guttentag-Lindsay model parallels the framework used by Bagehot. Bagehot's objectives in Lombard Street (1873) were to disabuse the politicians and the financial community of the view that the Bank of England was not unique (i.e., that it was "like any other bank"), to show in what ways the Bank was unique, and to draw the implications of the Bank's uniqueness for Bank policies. [ABSTRACT FROM AUTHOR]

The relationship between the expected rate of change of prices and the level of interest rates enjoys special status in economic theory. The positive relationship hypothesized long ago by Irving Fisher is widely accepted by students of economic theory, while its existence for United States experiences has, it appears, yet to be conclusively demonstrated. The absence of measurement of the relationship seems, however, not to have detracted greatly from its theoretical acceptability. Empirical verification of price-expectations effects warrants more attention, not only to substantiate the theory but also as a guide in formulating and evaluating national economic policy. A combination of monetary and fiscal policies which brings about prolonged inflation should by doing so tend also to increase market interest rates. These interest rate increases have important implications for saving and investment behavior and for the demand for money. If we are to assess the importance of these effects, we need some idea of their magnitude and timing, and this paper attempts such an estimation. [ABSTRACT FROM AUTHOR]

This article presents a comment on the paper "Inflation and Common Stock Values," by Donald Nichols. In that paper Nichols explores the impact that inflation has on the real value of tax claims on corporate profits and claims that inflation effectively results in falling equity values. The author extends this work by examining an inflationary environment that is continuous. The author shows how the economy reacts under these conditions and notes that the impact described in Nichols work is magnified.

The article presents comments on the paper "Individual Income Tax Provisions of the Revenue Act of 1964," by Joseph Pechman. The author looks at some issues raised in the paper's discussion of the program introduced by President John F. Kennedy and the provisions of the 1964 Act, criticizing Pechman's statistical analysis of revenue and distributional consequences. Pechman's comments on the retention of gasoline and property tax deductions are reviewed. Vertical equity is defined as the impact of income tax on income redistribution. The author feels that Pechman's measurement of vertical distributional effects of tax changes do not take interaction with horizontal effects into account.

The first section is devoted to the discussion of a valuation technique for making estimates of the value of pension promises consistent with the principles underlying the determination of the value of other assets reported on consumer balance sheets; and the second section to a consideration of the financial magnitude of the unfunded pension promises when valued consistently with other assets. The major purpose of the paper is to show the distortion of the size of consumer wealth arising from the fact that pension promises are not recorded in terms of their economic value. [ABSTRACT FROM AUTHOR]

A conference paper on expectations for the U.S. mortgage market in 1964 is presented. It is thought that the market is in good economic health due to general increases in income and savings and business activity has been steady. Another factor to consider is the amount of new home construction, which it is believed may increase as will the demand for housing among would-be homeowners.

A conference paper is presented that discusses a possible forecast of the U.S. economy, particularly debt management, monetary, and fiscal policies. The author believes that there are four factors that are directly facing the economy, including changes to the federal tax system, the succession of Lyndon B. Johnson to the U.S. presidency, changes in government financial policies, and the addition of four different judges to the U.S. Supreme Court.

The article develops refined estimates of the tax revenues that would have been received by the United States Treasury if the income from municipals had been subject to full current-income taxation. It is explained that the tax-yield estimates will be divided between the investors in state and local securities and the issuers of such securities. The article examines the opposition to the taxation of municipals. The article also touches upon local debt and interest payments, and the difference in interest rates between taxable and tax-immune obligations.

The article addresses the yield differential in the corporate bond market. The author refers to a study of changing credit conditions in the bond market, as well as the relationship between bond prices and interest rates from 1900-1944. This paper seeks to address price-making in the corporate bond market since January, 1955. The author cites Moody's Investors Service index as a primary data source of new and seasoned bond yields. The author discusses the behavior of corporate bond yields, the nature, construction, and limitations of Moody's indexes of corporate bond yields, and presents an explanation of the differential between yields on newly issued and seasoned corporate bonds.

The article provides an outlook for the money market in the U.S. for 1959. The article discusses the importance of the business picture for the money market and the characteristics of the money market including the shifting of participation by lenders and borrowers, the volatility of interest rates, and the evolutionary changes of instruments. The author examines information on the volatility of interest rates and discusses federal funds. The article also takes a look at issues related to the provision of bank loans to government security dealers.