Decrease Fed open market operations.
Allow overnight rates to fluctuate more than they do now.
Stop intervening in the markets except for permanent additions to the stock of money.
Increase the band sround the Fed Funds rate which causes the Fed to supply or drain funds.
REASONING
Look carefully at the changes in the basic money supply and you see volatility. Nothing but volatility.
Look carefully at the Fed Funds rate and you see stability. Nothing but stability.
To an economist, this is clear evidence of meddling by the Federal Reserve Bank's Open Market committee.
It's a misguided policy of interest rate stability; also called price controls. This is the last vestige of an obsolete activity.
Now that the economy has stabilized, it's time to let the market allocate overnight loans, rather than the OMC.
Let the Fed Funds rate fluctuate, as exchange rates do; as long-term interest rates do; as oil and gold prices do.
There will be no adverse effects if they widen the band around which the OMC performs open market operations and et short term interest rates fluctuate.
It's time for the Board of Governors to instruct the OMC to widen the bands on the Fed Funds target rate to at least one percentage point around the target rate each year until controls are ended.
