Monetary Policy Options

Monetary policy options have broadened in recent years to include possibilities for doing without monetary authorities. Most economists are of the opinion that the only way for maintaining the purchasing power of money is by achieving the minimum level of inflation which would promote economic prosperity. Inflation is damaging to an economy because it causes instability and uncertainty. People are less likely to save and invest if the value of their savings and investment is undermined by inflation. If money loses its value very rapidly, the prudent person will spend their money as quickly as possible to get maximum benefit from it.  Consumers would automatically be protected against inflation because private banks would first state an explicit inflation and then provide assurance for the performance of actions if the independent forecast does not achieve its targets.

Value is created by exchange because people will give what is of less value in exchange for something that something that is of greater value to them. In this manner, both parties benefit from the exchange. In essence, the exchange value of a product or service (article of trade) might not be the same as its price but is representative of what other products or services it can be exchanged for when traded. Exchange value does not have to be articulated in monetary terms in countertrade where specific amounts of goods ‘A’ are equal to or worth a specific quantity of goods ‘B’.

This envisages what the source or sender means which is communicated in the message to the receiver and what the receiver comprehends from the current perspective. The conversion of goods and services, ideas or other objects usually involves a significant functional achievement in trade. This is a progression that might be subjective to economic or technical factors but could include political and cultural factors because it could involve property rights, claims to access to resources and guarantees about quality or safety of use. In accordance with conclusive stipulations, exchange values can also be measured as quantities of average labor hours. Alternatively, prices are normally measured in money units.

For practical purposes, prices are however usually preferable to labour-hours, as units of account, although in capitalist work processes the two are related to each other. This means the creation of value for a certain good or service expressed in terms of another product or service. This shows the range of reference for something expressed in terms of another. For example, in the business of foreign exchange, the value of each currency is expressed in terms of the value of another currency. This creates an exchange value or exchange rate for each major currency relative to a benchmark currency just like the U.S. Dollar.