The tools of monetary policy

However, the situation is not as simple as merely adjusting the money supply. Instead, politicians and the bureaucrats making these decisions have their own political agendas and use monetary policies as ways of furthering those agendas. For liberals, monetary policy is a way to redistribute wealth in the economy, moving it from the "haves" to the "have-nots". Liberals favor low interest rates which make money cheaper (easy) and which enable low-income families to purchase (among other things) homes which offer the first significant step toward economic prosperity.

Conservatives, on the other hand, view monetary policy as a necessary part of the creation of capital, but generally favor intervention as a way to keep the economy stable. Intervention, according to Hayek and others, cannot be done well because there is never perfect information available. Tinkering, therefore, results

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er hand, provides a safe haven for investors. If the price is such that there is not a significant amount of economic profit to be made by gold producers, there is additional benefit in that the supply of gold is likely to remain steady. This helps maintain the price of gold, and also reduces the amount of speculation that would exist in the market. In this way, gold becomes an attractive investment on an international level. In the early 1990s, Greenspan was observed to be putting the United States back on the gold standard, but in an informal way. It would not have been legal for the government to buy and sell gold as it did previously, but the Fed bought and sold government securities in response to changes in gold prices. When the price of gold dropped, the Fed reduced interest rates. This effectively made gold more attractive than currency and Greenspan's goal was to move more money into gold. Those who support this philosophy believe that the cost of capital goes down when gold is kept steady, stock prices increase and mortgages would be less expensive. Managing gold prices would also lead to a lower budget deficit since interest rates (also low) would result in lower debt interest. In the long-term, gold producer
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Approximate Word count = 1580
Approximate Pages = 6 (250 words per page)

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