Central banks manage systemic risks by maintaining a balance between expansionary economic activity through bank lending and control of inflation through reserve requirements.
The weakening of fixed investment and other interest-sensitive expenditure counteracts to varying extents the expansionary effect of government deficits.
This stagflation meant that both expansionary (anti-recession) and contractionary (anti-inflation) policies had to be applied simultaneously, a clear impossibility.
Indeed, the first wave of controls were successful at curbing inflation temporarily while the administration used expansionary fiscal and monetary policies.
