Success or Failure of Tight Policy against Inflation. 
I am not going to discuss the merits or the costs of 
restrictive monetary or fiscal policies in general. I merely 
want to discuss whether and how far they are sucessful in 
achieving what they promise: A drastic reduction of inflation 
or (to be discussed to-morrow) of budget deficits. 
In parenthesis it may be noted that the choice between 
monetary and fiscal tightness, in relation to the one or 
the other aim is not irrelevant: In other words various types 
of restrictive policy may be contradictory in relation to 
various aims. The high interest policy, by dammaging private 
investment, housebuilding and consumer's credit, will 
inevitably lead to higher budget deficits. (One has to bear 
in mind that not only real but in fact the money rate of 
interest is relevant, insofar as long term credit with fixed 
interest is concerned: Whoever considers an eventual reduction 
of interest and inflation rates will be reluctant to borrow 
at 22 p.c. The use of flexible interest in long term credit 
is not yet general. Moreover, the high interest, for quite 
the same reasons, is a severe direct burden on the budget. 
On the other hand, a policy of increasing taxation, indirect, 
but also direct (if trade unions base their demands on take 
home pay) will raise prices and wages, and so facilitate the 
the continuing merry go round of prices shifted to wages and