www.informedtrades.com A lesson on open market operations and how the federal set aside increases and decreases the money supply in order to go interest rates and what this means for traders of the stock, futures, and foreign exchange markets. In our last lesson we looked at the structure of the Federal Set aside and the gears of the FOMC, the part reliable for implementing Monetary Policy. Now that we have an understanding of this, we can look further into exactly how monetary policy is facilitated and what happens to markets under differing scenarios. Monetary Policy very simply is anything which relates to action by the Federal Set aside to influence the amount of money and credit available in the economy. To know exactly what this means, one first must know the concept of fiat monetary systems. Fiat Monetary Systems: The United States, like most major economies, has what is known as a fiat monetary logic. A Fiat Monetary logic very simply is any logic which uses a monetary unit (in this case the US Dollar) which is not convertible to some commodity, in general a precious metal such as gold. Fiat money, is money that is backed by the credit of some entity, normally a government, and the value for which is derived from its relative scarcity and the faith placed in it by the population which uses it. This is vital to us as traders because the fact that the Dollar is not convertible to a commodity such as gold gives the Federal Set aside the …