Questions on monetary policy and debt management.. Questions for the Secretary of the Treasury.. Questions for the Chairman of the Board of Governors of the Federal Page Questions on monetary policy and debt management.. Questions for the Secretary of the Treasury. Questions for the Chairman of the Board of Governors of the Federal FOREWORD In connection with its responsibilities under the Employment Act of 1946, the Joint Economic Committee has had a continuing interest in the formulation and application of monetary policy and in the problems of debt management. Intensive studies were conducted in 1949 by the Subcommittee on Monetary, Credit, and Fiscal Policies, under my chairmanship, and in 1951 by the Subcommittee on General Credit Control and Debt Management under the chairmanship of Representative Patman, who is the present vice chairman of the Joint Economic Committee. Since these studies, the committee has, in conjunction with its annual reports on the President's report or on special occasions, attempted to keep abreast of current problems in this area. The Joint Economic Committee is now conducting a large-scale study of employment, growth, and price levels. As part of this study the committee held public hearings at which the Secretary of the Treasury, the Chairman of the Federal Reserve Board and other officials of the System, and five dealers in Government securities testified on current monetary and debt management policies. As a supplement to these hearings the Joint Economic Committee has submitted a series of questions to the individuals and organizations appearing at the hearings, and to the other 12 firms dealing in Government securities. The questions have been designed to present the general setting for current monetary policy, a comprehensive view of the nature of the market for Federal Government securities, and the role of this market in monetary policy and debt management. The questions were submitted to the respondents during the week of August 16. Because of widespread interest in the Congress, and the press in the questions themselves, they are reproduced herewith prior to receiving the answers. The answers are to be submitted by the end of September and are expected to be published by the committee during the month of October, as part of the materials upon which the committee will be basing its report which is to be submitted to Congress by January 30, 1960. AUGUST 31, 1959. IV PAUL H. DOUGLAS, Chairman. MANAGEMENT QUESTIONS FOR THE SECRETARY OF THE TREASURY I. MONETARY POLICY AND ITS RELATION TO DEBT MANAGEMENT A. Has too much reliance been placed on monetary restrictions and not enough on budgetary surpluses in recent years to achieve the goals of economic stabilization and sound debt management? B. Does the Treasury participate in the formulation of monetary policy? If so, in what ways? Is any such participation sufficient to insure coordination of monetary, budgetary, and debt management policies for achieving public economic policy objectives? II. THEORY AND PRACTICE OF DEBT MANAGEMENT A. Should the Treasury follow the policy of issuing long-term obligations during periods of economic expansion and short-term obligations during periods of economic contraction? Alternatively, should the Treasury manage the debt with the objective of minimizing interest costs? B. In view of the postwar history, can the average maturity of the debt be lengthened appreciably during periods of economic expansion? during periods of economic contraction? C. Is the issuance of short-term debt during periods of economic expansion inflationary? If so, why? D. Why has the Treasury somewhat lengthened the average maturity of the debt during periods of recession? E. What are the arguments for and against assigning the entire task of debt management to the Federal Reserve System, completely separating budgetary policy and debt management policy? F. Would the Treasury favor limiting the number of types of Treasury securities currently being issued? For example, the Treasury might issue only bonds; or only bills; or consols only. III. MARKETING THE PUBLIC DEBT A. To what extent does the Treasury use moral suasion in marketing its debt? What type(s) of moral suasion is (are) used? B. On balance, would debt management costs be reduced by the Treasury's maintaining a larger cash balance than at present so as to minimize the need for having to come to the market at inopportune times? C. Could the Treasury undertake its financings more frequently and in smaller volume in order to make it easier for the market to absorb its issues? Could "tap" issues be used for this purpose? |