For Volcker, M1 Is Out, but for Proxmire It's In
In a city that keeps close tabs on what's in and what's out, Federal Reserve Board Chairman Paul Volcker made it official yesterday: M1 is out.</br></br>Volcker told the Senate Banking Committee, which Proxmire chairs, that the Fed will no longer target the growth of M1, a basic measure of the nation's money supply.</br></br>But Proxmire is one of M1's biggest fans. And he told Volcker the 1978 Humphrey-Hawkins law requires the Fed to report to Congress on the rate at which it wants the basic money supply to grow.</br></br>Proxmire questioned the legality of the Fed's refusal to provide an M1 target but said that he would try to use quiet diplomacy to get the central bank to change its position.</br></br>M1 consists of money involved in transactions-currency, checking accounts and travelers checks-and according to some economists is linked to economic growth: If money supply expands, growth increases; if it shrinks, the economy contracts.