This primer is supposed to introduce readers to the workings of the present U.S. monetary system. So it’s only natural that it should take established monetary arrangements for granted, including an official, “fiat” dollar currency managed by the Federal Reserve System.
And while I haven’t hesitated to point out shortcomings in the Fed’s management of the dollar, and have even dared to suggest some ways in which that management might be improved upon, I haven’t questioned the fact that, whether it does so competently or not, the Fed is indeed ultimately “in charge” of the U.S. monetary system. That is, I’ve assumed, that the U.S. dollar is the only important domestic currency unit, and that the total quantity of dollar-denominated exchange media, the behavior of the general level of prices, U.S. dollar exchange rates, and the periodic flow of domestic dollar-denominated payments, remain under the discretionary control of the FOMC.
Monetary Policy, Broadly Understood
But while a monetary policy primer must generally deal with existing monetary arrangements, it doesn’t follow that it should overlook others altogether. “Policy,” according to Webster, is “a high-level overall plan embracing the general goals and acceptable procedures especially of a governmental body.” And though, within the set of possible plans, the most readily-implemented ones take existing institutional arrangements for granted, there are always other, more radical options that involve either replacing established arrangements or confronting them with rival ones with which they must compete.
Radical policy alternatives are, inevitably, controversial ones as well; so a primer is hardly the place for any detailed consideration, let alone a defense, of any of them. Instead, we must settle for a quick glance at several especially prominent or intriguing possibilities, all of which involve moving away from the present, discretionary system and towards a more-or-less “automatic” alternative.