It’s remarkable how often investors and policy makers focus on the wrong things and are misled. When it comes to monetary policy, obsessive attention is paid to interest rates. By doing so, observers are often wrong-footed. Indeed, monetary policy is all about changes in the money supply, not interest rates.
At present, this “barking up the wrong tree” phenomenon is occurring in Japan where, among other things, the yen just hit a 40-year low.
