During this period, monetarism was an increasing influence, with its focus on the importance of limiting the rate of growth of the money supply to control inflation. But it was the sharp recession in 1974-75 that really provoked the Congress to provide more detailed instructions to the Federal Reserve about the objectives that should guide monetary policy.
We have to accept that markets, even under as favourable conditions as are likely to be found in the real world, have not – and will not – consistently act as a smooth, well informed, far-sighted Walrasian auction process to maximise benefits and minimise the costs of capital flows.