Sandro, I feel as I was the "target" of your critique. Anyway, Friedman´s "Thermostat Analogy" "looks" at the equation of exchange and sees the Fed´s job as controlling the thermostat (Money supply growth) so as to compensate changes in the "outside temperature" (Velocity) in order to maintain the "Inside temperature" (NGDP growth) stable. Since the mid 1980s, and for long streches of time that´s exactly what happened (Great Moderation was the result). It failed miserably in 2008/09 (Great Recession) and for the next decade managed to keep the "inside temperature" stable at a lower (but stable) temperature! The Fed reacted appropriately to the C-19 shock, leading to the shortest recession on record (2 mos) and also the fastest recovery. The it failed to adjust the thermostat so the economy (NGDP) heated up!
Sandro, I feel as I was the "target" of your critique. Anyway, Friedman´s "Thermostat Analogy" "looks" at the equation of exchange and sees the Fed´s job as controlling the thermostat (Money supply growth) so as to compensate changes in the "outside temperature" (Velocity) in order to maintain the "Inside temperature" (NGDP growth) stable. Since the mid 1980s, and for long streches of time that´s exactly what happened (Great Moderation was the result). It failed miserably in 2008/09 (Great Recession) and for the next decade managed to keep the "inside temperature" stable at a lower (but stable) temperature! The Fed reacted appropriately to the C-19 shock, leading to the shortest recession on record (2 mos) and also the fastest recovery. The it failed to adjust the thermostat so the economy (NGDP) heated up!
Some illustrations here: https://marcusnunes.substack.com/p/when-monetary-policy-tightening-is
And this is a nice exposition by Nick Rowe: https://worthwhile.typepad.com/worthwhile_canadian_initi/2010/12/milton-friedmans-thermostat.html