Saturday, September 20, 2008

A Strong Form of Monetary Policy

: To understand the organization of this website, read the very first post, Introducing OnTrack Economics, written earlier today.

Several years ago I wrote a paper on monetary policy, and its workings and impact on economic activity, the price level and investment markets, as I see it. I tried, without much success, to get various powers-that-be interested in my ideas. Fortunately, with the advent of the web, and particularly blogging, it is no longer necessary to go through the "powers-that-be" filter any longer.

My reading website, OnTrack Reading, gets several hundred visitors a day from people looking for information concerning reading instruction, word lists, teaching tips, etc. As those interested in investing, and economics generally, stumble across the information I intend to add to this website, I have little doubt that readership will grow because they will find much here that is both new and useful (in time.)

A Tutorial on Monetary Policy

I hold to a very strong form of Monetary Theory. By this I mean that I ascribe tremendous power to those who wield the monetary policy levers, perhaps even more than even the monetary authorities themselves feel they possess. I've thoroughly explained my thinking in A Monograph on Monetary Policy that you can download by clicking the link. As I explained in my very first posting, all PDF's are stored at my other website, so you will be asked whether you want to open the PDF from

The monograph is quite long, but you will find it particularly applicable in the present environment where the Fed Funds rate again is threatening to plunge to nearly zero if economic conditions continue to deteriorate.

An Invitation for Comments

If I begin to receive comments and questions on the monograph, I will devote several posts to addressing them, so feel free to have at it. I've enabled comments on all posts for now until I see how bad the spammers get. I finally had to disable comments on my other site, but it's a more formal site than this, so hopefully it will be possible to have a thorough exchange of ideas here without much hassle.

Has the Fed Really Been Tightening?

In any case, over the next few days I'll discuss various aspects of the theory set forth in the monograph so that readers can discern the relevance to today's economic situation. However, if you read it before then, perhaps you will understand how it is that the Fed has not actually been easing as they have lowered the funds rate back to 2%. To the contrary, it's probable that they've been inadvertently tightening instead.

Next Post: Just How Strong?

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