ESSAYS IN PERSUASION

PART

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intend to stick to this irrespective of fluctuationsin the value of the dollar (or of gold); whether,that is to say, they would sacrifice the stabilityof sterling prices to the stability of the dollarexchange in the event of the two proving to beincompatible. At any rate, my scheme wouldrequire that they should adopt the stability ofsterling prices as their -primary objective—though this would not prevent their aiming atexchange stability also as a secondary objectiveby co-operating with the Federal ReserveBoard in a common policy. So long as theFederal Reserve Board was successful in keep-ing dollar prices steady the objective of keepingsterling prices steady would be identical withthe objective of keeping the dollar sterling ex-change steady. My recommendation does notinvolve more than a determination that, in theevent of the Federal Reserve Board failing tokeep dollar prices steady, sterling prices shouldnot, if it could be helped, plunge with themmerely for the sake of maintaining a fixed parityof exchange.

If the Bank of England, the Treasury, andthe Big Five were to adopt this policy, to whatcriteria should they look respectively in regulat-ing bank-rate, Government borrowing, andtrade-advances? The first question is whetherthe criterion should be a precise, arithmeticalformula or whether it should be sought in ageneral judgement of the situation based onall the available data. The pioneer of price-stability as against exchange-stability, Professor