THE PEOPLE WHO CONTROL the Federal Reserve Board are following a tight money policy because they believe our main economic problem is caused by too much money chasing too few goods. Now think about that for a minute. The image that comes to mind is the merchant backed up against his shelves by a screaming mob of customers thrusting fistfuls of greenbacks in his face, bidding up the prices of his goods and emptying his shelves. Do you know any merchant who has that problem? The problem most businessmen are facing is that their goods are being pursued not by too much money, but by too little. So that's one way the Fed is wrong. The reason the Fed is worried about the money supply is that it thinks that inflation is our most important economic problem. Wrong again. Inflation was a big problem. Now the danger is depression. What do you see today? Skyrocketing prices? No. People losing their jobs? Yes.

The Fed is also wrong in thinking that money supply has been the major factor in our post-Vietnam inflation. OPEC's cartel pricing was the main cause of that inflation. Just look at where the biggest inflationary bulges occurred -- they immediately followed the two big OPEC price boosts. The Fed has gotten by with this nonsense for two reasons. One is that the liberals, who ordinarily oppose high interest rates, so love to make Vietnam and Lyndon B. Johnson into villains that they have adopted as sacred writ an idea most recently expressed in Time magazine: "Most economists believe that the great inflation stems from Lyndon Johnson's desire to print more money to pay for both the Great Society and Vietnam rather than reveal to the voters the true cost of the war." Johnson's policies did produce inflation, but it was the single-digit variety the American economy can live with, not the double-digit OPEC version that almost wrecked us in the '70s.

The other reason the Fed gets away with its policies is the conventional wisdom that it should be "independent" -- immune, in other words, to any kind of political control. But the essence of democracy is that the agencies of government must be accountable to the people's elected representatives. The Federal Reserve is not, as so many people seem to think, sanctified in the Constitution. It was created by Congress, and it can be changed -- or even abolished -- by Congress.

Sales of domestic-built cars were off 18.5 percent in January. Weak sales in the last two years have caused the Big Three automakers to cut a fourth of their American employes. Most dangerous of all is another effect of the weak sales -- they cause U.S. firms to retrench, threatening their long-range ability to come back and compete with foreign rivals. Late last fall, GM canceled or delayed more than $2 billion worth of major construction projects and Ford eliminated 24 percent of its capital spending program.

My answer to this is not another lecture on the deficiencies of American capitalism. Those deficiencies must be faced, but they can't be remedied overnight -- and the auto industry needs help now. Since it's an emergency situation requiring emergency treatment, I propose an embargo on Japanese cars. I know all my liberal friends will scream and say, "Don't you believe in free trade?" My answer is: not when it's killing us. And I don't propose an embargo that would last forever or give American manufacturers an excuse to be less competitive or to gouge consumers. The embargo would last only while American auto manufacturers' prices stayed at present or lower levels. Otherwise it would be removed after two years or as soon thereafter as Japan removes the complex of trade barriers it has erected against the sale of American goods and starts paying its fair share of our mutual defense.

As for the trade barriers, they are, in their most infuriating form, of the nontariff variety -- you have heard, I'm sure, about our softball bat that had begun to sell well there until Japanses authorities removed it from the market on the ground that the trademark was in the wrong place.

As for defense, a major reason for the superiority of many Japanses products is that their capital has been devoted almost exclusively to the production of civilian goods, while much of ours has gone for defense. Japan's 1982 defense budget is roughly one-twentieth of ours. Sen. Howard Baker said in January. "I would like to see the president of the United States and the prime minister of Japan sit down and arrive at a fair allocation of the costs of defending the Free World... we will do our part, but it's time you do yours."

I welcome this kind of talk, because it means we're beginning to liberate ourselves from the cliches that govern so much of our thinking about public policy. It is idiotic not to get your allies to pay their fair share of defense costs simply because you don't want to risk injury to "the alliance" that respectable foreign policy writers always discuss in such reverent tones. It is also idiotic to risk a depression just because we want to punish the American auto industry for its past sins. However justified we may be in wanting vengeance for all the gas-guzzling, air-polluting lemons that Detroit has inflicted on us, I think it is in our national self-interest to give the industry one last chance to catch its breath and live. Or do you really think we can shift overnight to hightech economy and safely ignore the death of the great auto companies and all their suppliers?

Not long ago this headline appeared in The Wall Street Journal: TOP EXECUTIVES THOUGH WELL-PAID STILL WORRY ABOUT PERSONAL WEALTH. The article noted that the executives who run America's corporations make a lot of money -- salaries of $300,000 to $700,00/ aren't uncommon, and when bonuses and other incomes are included, chief executives of many companies make more than $1 million a year. But, the article went on to say, "many of these executives worry deeply about the adequacy of their personal wealth," they "worry about inflation, income taxes, estate taxes, or the performance of their personal investments," and they wish they could spend more money on "travel and recreation" and acquiring things in pursuit of personal hobbies."

This seems insane to me. You don't have to be St. Francis to be disturbed that not just corporate executives but doctors, lawyers, government employes, the people who work for the television networks and the great newspapers -- almost all of them are preoccupied with money and the things it can buy. This means that there is little criticism of the material ethic and few examples for those who might seek another path. Of the prominent Americans of the last decade, only Ralph Nader comes to mind as one who has been indifferent to personal wealth. When Michael Deaver recently announced that he just can't make ends meet on his salary of $60,000 and that he will leave the government at the end of the year, I did not hear a single voice raised to say, "What is wrong with this man and his values -- how can he dream of leaving such an interesting job with so much power to affect events because it pays only $60,000 a year?".

The United Virginia Bank has recognized the need to return to our roots. It has a commercial that begins with an early American scene of Pilgrims felling trees and building cabins. The announcer says, "Our first settlers felt the need to create shelter. We still need shelter from the things we don't understand. Look into our Tax Shelters for the Eighties."

Even more inspirational is this full-page advertisement by the East New York Savings Bank in The New York Times of Dec. 14. The bold-type headline proclaimed: I WANT IT! I WANT IT NOW! AND I DON'T WANT TO PAY ANY TAXES!