ABSTRACT
The most striking feature of the era of ‘competition and credit control’ is the explosion in monetary growth which occurred. Table 7.1 shows this enormous expansion in the growth of M3 compared to the period before and after. M3 grew by over 60 per cent in the 27 months of the ‘new approach’. Normally such growth would be regarded as grossly excessive in any Western economy, even by non-monetarists. Nevertheless, a number of reasons were offered why it might not be excessive. These ranged from arguments that the statistics were misleading to a view that the nature of the demand for money function justified this growth. These arguments are considered in section 7.1. In section 7.2, consideration is given as to why competition and credit control was so unceremoniously dropped. The reasons considered include the technical deficiencies of the scheme as well as the political context at the time of the decision. Finally in this chapter, the effects of the very rapid growth in money are considered. This is done first in a neo-Keynesian framework in which the various possible transmission mechanisms are considered seriatim. These consist of the impact of the money supply on the property market, on the stock market, on inflationary expectations and on the exchange rate. Through all of these routes, as even a diehard anti-monetarist has to admit, the money supply could have increased inflation, or lowered unemployment. Finally, a more monetarist analysis of the impact is presented and considered. M<sub>3</sub> Growth Per Cent Per Annum https://www.niso.org/standards/z39-96/ns/oasis-exchange/table">
Old Approach
Transition
New ‘New Approach’
1963/4
7.3
1970/1
12.3
1974/5
10.7
1964/5
5.9
1971/2
14.4
1975/6
8.2
1965/6
9.3
New approach
1976/7
9.7
1966/7
3.6
1972/3
27.3
1977/8
14.5
1968/9
9.6
1973/4
25.2
1969/70
2.4
