In reply to:
It’s all about expectations.
Central banks fail at setting them, maintaining them and then end up destroying them with capricious changes in policy. Will the FED ease or tighten? Will it raise or lower interest rates? Will the ECB do the same? Everywhere there is a Keynesian focused central bank there is mistrust in the monetary system. If Monetarism attempts to nullify the actions of central banks with policy designed to set and maintain expectations (interest rates and monetary supply) then government, business, and consumers will all be able to plan their futures to a much greater accuracy than what is available today.
How can anyone estimate what will happen to their money in a year or three in such current (2013) economic uncertainty? Savings? Non-existent. Treasury returns? Empty. If MV = PT, and the FED/ECB continue to increase M, then its obvious that the V will continue to shrink. And that is in fact exactly what has been happening. Banks continue to refrain from lending, hoarding the quantitative easing dollars that are continuously being injected into this lopsided equation. Will this ever stop? How can this end gracefully?
Keynesian directed central banks are always playing catch up, and are always one beat behind. The only result is that the expected rhythm gets so out of sync that the whole monetary musical machine comes crashing down around us.