For a Kentuckian, Robert P. Black, president of the Richmond Federal Reserve Bank, is about as close to a Virginian as one can come. He took three degrees at the University of Virginia, including a Ph.D. in economics, married a woman from Charlottesville and has worked for the Richmond Fed for nearly half of his 52 years.
Black headed for Charlottesville from Hickman, Ky., a small town in the western part of the state, intending to be a businessman. (Casey Jones, the railroading man who met his fate in Virginia, was Hickman's most famous native.) But once at U-Va., Black "got sidetracked into economics" and not much later got his first job from the Richmond bank.
"I guess my job now is what I pointed myself toward all along," Black said in his soft-spoken voice that sounds more like Virginia than Kentucky. "My degree was in monetary theory and policy."
Black doesn't regard himself as a pure monetarist but says he has favored "for more than 20 years" trying to control inflation by controlling the money supply, a view that "puts me fairly strongly in the monetarist camp."
Certainly he was enough in the camp that he was very pleased indeed a year ago when the Federal Open Market Committee, the monetary policy-making group for the Federal Reserve System, voted to switch its method of operations. On Oct. 6, 1979, the FOMC announced it would henceforth try to control growth of the money supply by controlling bank reserves, and therefore their freedom to make loans, rather than trying to influence the process indirectly by managing interest rates.
In each of the two months preceding that decision, Black had dissented from the policy choice made by the FOMC, saying it was not pushing up interest rates fast enough to keep the money supply on the right path.
While he won't discuss his recent policy recommendations in detail, he says flatly, "The monetary aggegates have expanded much more than anybody wanted." And he notes, perhaps suggesting his own policy preferences right now, that at the September meeting of the FOMC four members again dissented, favoring stronger actions to get growth of the money supply back within the chosen target range.
Strong enough or not, during the last two months, interest rates have shot up again -- banks' prime lending rate reached 14 1/2 percent last week -- as the Fed has tightened credit conditions.
Sharp fluctuations in interest rates are, unfortunately, part of the price that has to be paid to control the money supply, Black maintains. The ultimate result, lower inflation, should be worth it, he believes.