It seems to me that Bruce Littleboy's questions point to the acceptance 
in modern macroeconomics Keynes's separating of the  price-level 
determination from the supply and demand for money (cash) -- the 
classical Quantity Theory of Money-- in his /General Theory/ (1936).  
Were this not so, it would easily be recognized that variations in asset 
prices should not be included in estimations of the price level.

People spend their net incomes in three categories, consumption, 
purchasing financial assets (saving), and hoarding cash.  Since 
financial assets are instruments by which borrowers (their suppliers) 
obtain the savings of income earners (the purchasers) to spend, 
variations in these flows do not change the prices of goods and 
services, given the demand for (hoarding) and supply of cash (from the 
central bank).  Also, interest rates are inversely related to the prices 
of financial assets.  Thus, their variations do not affect the price 
level, given the demand for and supply of cash.

Now given the supply of cash, variations in its demand affect the prices 
of both goods and services and financial assets.  If the public reduces 
its level of hoarding, prices will rise (and interest rates fall), given 
the quantity of cash supplied.  Prices fall when the public increases 
its level of hoarding (and interest rates rise), given the available 
quantity of cash.

None of the above says anything about monetary policy -- changes in the 
quantity of money (cash).  But increases in the quantity of money will 
increase the prices of goods and services (and financial assets), given 
the demand for cash (hoarding), and vice versa.  This is why some 
analysts, including the Austrians, seek to link variations in interest 
rates closely with monetary policy.  Yet interest rates may rise or fall 
independently of what a central bank does.  Similarly, the price level 
may rise or fall independently of what a central bank does.  Of course, 
for the price level to rise persistently and at high rates, a central 
bank's excessive money (cash) creation would have to be there.

In the current issue of the /Freeman/, Henderson and Humel, dispute with 
data claims by some free-market adherents that Alan Greenspan was 
culpable in creating asset bubbles during his tenure.

James Ahiakpor