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In this paper we have argued that the existing powers of the UK monetary authorities for controlling the money stock are inadequate. We have also put forward a proposal which we think would allow the authorities to control the money stock precisely or at least with the degree of precision which the adoption of a monetary rule would require. We have not attempted to argue for or against such a rule, nor have we addressed ourselves to the question of how exactly the money stock should be defined. Our proposed technique of control would involve the scrapping of the current definition of the reserve assets of the banking system, and of all existing quantitative restrictions on bank lending. A new reserve asset would be created which can only be held by the banks and created by the Bank of England. Control over the supply of this asset coupled with control over the supply of cash would give the Bank of England the power to control the money stock precisely. Our scheme has the additional advantages of being relatively simple to introduce, of promoting rather than hindering the efficient bank, and of making clear who is and who is not responsible for the behaviour of the money stock. [ABSTRACT FROM AUTHOR]

Presents a reply to the comment about a proposal for the control of money supply in Great Britain. Ability of the banks to expand loans or acquire other assets from the non-banks without inducing large interest rate changes; Adoption of the practice of exempting each bank's inter-bank deposits from the reserve requirement assessment; Improvement of the method of money stock control through the cash based scheme.