Based on the historical and contemporary development of central banks and monetary policy operations, and extending the monetary circulation theory of the first volume, this volume constructs a fluid mechanics-based monetary policy theoretical framework, proposing three new perspectives for understanding monetary policy and central bank functions. First, the time value of money constitutes the entire focus of central bank attention. Second, monetary policy operating within a decentralized decision-making economic and social order is a special policy system based on micro-level decision-making and macro-level response. Third, monetary policy resembles a fluid mechanics system subject to both internal friction and external pressure, where the expected effects often exhibit greater uncertainty compared to other policy outcomes. Based on the analytical framework, this book proposes and proves theorems such as the internal frictions in the monetary policy transmission, monetary and fiscal policy as special-purpose vehicles for each other, the embedding of macroprudential management within monetary policy, monetary super-neutrality, and that asset prices are simply another layer of monetary illusion.