ABSTRACT
This chapter focuses on some of the initial thoughts and suggests that the rise in unemployment, the problems with the exchange rate and the dissatisfaction with existing monetary aggregates led to the abandonment of the monetarist strategy. It explains how government ministers defended their attitude and policies towards unemployment between 1983 and 1986 when growth replaced recession. The chapter considers the relationship between wage rigidity, the ‘non-accelerating inflation rate of unemployment’ and unemployment. It describes the political and economic decisions to end overfunding. The chapter examines why other monetary aggregates were introduced between 1983 and 1985, and ask whether the targeting of MO re-established credibility in the government’s economic policy. The support from the Bank and the Treasury had become clear at a meeting between all the monetary officials, the chancellor, the foreign secretary and the prime minister on 30 September 1985.
