The U.S. economy was subjected to severe strains during the first half of 1980. When major economic developments occur so rapidly, it is difficult to isolate the basic forces that are driving the economy. Explanations that seem reasonable one week are apparently negated by developments that occur a few weeks later. Now that the first half of 1980 is history, it is possible to present a coherent explanation of economic developments that arose during this period, especially in regard to the role of monetary actions. Such an explanation requires more than a simple listing of economic events; it demands a framework of analysis that ties diverse economic events together and relates them to policy actions.