WITH considerable unhappiness, moneymen still vividly recall the episode in the late summer of 1966 that came to be known as "the credit crunch." Restricting the nation's money supply in order to slow a rapid price rise, the Federal Reserve Board acted so decisively that the financial markets reacted with hysteria. Interest rates rose rapidly, the Dow Jones average sank 25%, and many lenders were so short of funds that it became extraordinarily tough for corporations to borrow at all.

The Federal Reserve has been fighting inflation in much the same way so far in 1969, but until now the results have...

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