By Mike Treen
There is much discussion today around how effective monetary policies are in regulating the ups and downs of the business cycle.
Monetary policies are run by the Central Banks of the respective countries with the US Federal Reserve operating like the world’s central bank. Their principal tools are the setting of certain interest rates they can control or influence and creating or reducing the supply of token money.
The US Federal Reserve resumed monetary creation policies earlier than expected at its July 30/31 meeting including a cut in what is known as the federal funds rate from 2.5% to 2.25%. They also halted the repurchase of the massive amounts of token money issued between October 2008 and October 2015 in response to the global financial and economic crisis of that time.
To understand what is happening we need to understand the interaction of three types of money in existence today.