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Raising and lowering the funds rate is ultimately futile and deleterious to the economy as is all government tinkering. Tinkerers are essentially politicians or working for politicians who have an extremely short horizon. It is like turning the helm on a great oil tanker over to a novice because he knows how to drive a car. He is ordered to change course 10 degrees to the right so he puts the helm over and nothing happens. So he puts it over a little farther and still there is no apparent response, so he does it again. Then the ship begins to turn. He waits for it to come to the proper course and centers the helm. The ship keeps turning to the right. The pilot becomes concerned and puts the helm over to the left. The ship keeps turning right. Finally it stơps turning. The pilot turns the helm left some more to bring it back on course and the process begins anew as the great ship embarks on a series of ever wilder S-turns until it hits the bar.
Economic changes induced by fiddling can take several quarters to a couple of years to manifest in the economy. The politicians directing the changes need them to happen far enough ahead of the next election to save Congressional seats. Such gyrations are typical of Keynesian meddling. Bush is a "conservative" Keynesian by his own declaration which means he is economically ignorant as politicians tend to be. Keynesianism is not economics. It is an academic rationale for government control of the economy; it is basically socialist. A "conservative" Keynesian is one who desires outcomes that would enhance the market.etc. but John Maynard's system is a totally inappropriate set of tools for that.

Politicians are activists, doers, people who think nothing works unless they direct it properly. Such people have not patience for Economics in school. It is the dullest subject one can study. Only two presidents in the last century have actually understood how the market actually works, Coolidge and Reagan. Only Reagan had a degree in Economics. Kennedy was lucky in his choice of advisors. The only proper role of the Federal government is to keep prices stable, no inflation or deflation. Read John Maynard Keynes sometime, not as one looking for enlightenment but as an old time English professor(the kind who still teach English as a rational communication code). You see many logical fallacies and self contradictions. Paragraphs do not make logical sense in themselves. Conclusions do not follow from premises. But he tells politicians that only they can safeguard the economy and that the tools with which to do that are fiscal, creative and prolific taxing and spending and politicians love it. It speaks to their conceit. Bush calls himself a Keynesian but it is the monetarists who prescribe tinkering with the money supply. They are sort of a complement to the Keynesians. The greatest of the Monetarists, Milton Friedman, in his writings stressed stability and cutting regulation. In practice he did not promote tinkering even though the monetarists generally like to fiddle as much as the Keynesians do but with a slightly different set of knobs and dials. Presidents and kings have always resorted to inflation to welsh on the national or royal debt by steadily reducing the value of the currency so that the debt is repaid in cheaper money, i.e. only actually partially repaid. Bush is no different. When that process starts, the inflation rate must increase faster and faster for the government to stay ahead because interest rates rise to compensate for the inflation. Eventually rates go up faster than the inflation and the economy hits the wall of recession/depression.

Well stated, and you mention two of my very favorite presidents, Coolidge and Reagan. I agree that GWB is not well advised on economics, particularly monetary policy. I was happy to see his first chief economic advisor, Larry Lindsey, writing a week or so ago and taking a clear stance against tax increases. But if GWB had good monetary advice, I believe he would take it; he just has no one around him that is not compromised to the academic Keynsian/monetarists.

I, too, admired Milton Friedman for his small government, individual freedom approach to political/economic issues. Unfortunately, he did great harm to classical economics by assisting the Keynesians in blaming the Great Depression on the gold standard as managed by the Federal Reserve. In that regard, I did not find his arguments persuasive, as he essentially contended that the Fed monetary policy in the Twenties was so loose as to cause inflation, but so tight has not to allow real economic growth. He contended the Fed caused a deflation, when the gold standard merely contracted the money supply to accommodate the great commercial contraction caused by Smoot-Hawley tariffs. Worse, he was probably the central economic figure who persuaded President Nixon to close the gold window in 1971 and to cut the dollar completely away from gold in 1973, so his money quantities could be tested by the Fed. When finally tried by Volcker in 1979-1982, targeting money quantities was an international catastrophe, and monetarism was abandoned. In 2003, MF conceded he would not have contended so strongly for his views if he had it to do over again.

Thanks for you response.