Social institutions are groups that provide for ways in which to meet societal needs. One need of society is the economic need, and in the United States, the Federal Reserve is one of the social institutions that meet this need. Although most people do not think regularly about the function of the Federal Reserve, is likely the most important social institution in the United States. The Federal Reserve System is designed to make decisions that affect the success and failures of various economic establishments throughout the nation. As a social institution, this particular system is based on either creating pressure or relieving pressure depending on the need of the social economic system. Through the development of strong decision-making, the …show more content…
Federal Reserve is responsible for the flow of money within the economy, making it one of the strongest social institutions in the United States. For many people in the United States, The Federal Reserve system is a mystery. The Democratic system within the United States is supposed to guarantee that elected politicians rise into power so that private capital would depend upon the nature of these decision-making bodies of elected officials in order to operate. However, in truth the Governors of the Federal Reserve have the greatest amount of power in determining the larger questions that will influence the way in which the economy manifests. In many ways, these decisions determine who is going to fail and who will succeed. According to Greider (1989), the American people are largely uninterested in understanding how the Federal Reserve has an influence on the economy. Economic system in the United States is primarily created by the Federal Reserve system.
Grieder (1989) calls the system “the modern equivalent of the Kings keep – a separate storehouse alongside the private economy and independent of its forces”. The Federal Reserve system keeps the bank system rolling, operating as a valve through which commercial banks will borrow hundreds of millions of dollars in order to make up for shortages that are temporary for the required reserves that they need to meet federal standards. Another valve that operates with from the New York Federal Reserve Bank is the sale of government securities on the open market which helps to regulate the amount of money that either is put into or taken out of the economy. Either the injection or withdrawal of money is conducted with the intention of keeping pressure at a study level. When the demand for credit exceeds the supply and interest rates go up, then the Fed can increase the supply of money in order to put pressure on the rates go …show more content…
down. As an example of a social institution, the Federal Reserve stands as a model through which society functions.
The Federal Reserve board made up of appointed governors is basically in charge of making sure that the valves and pressure is relieved or tightened as needed in order to make sure that the economy continues to function. The primary purpose of the Fed is to oversee the structure and security of the commercial banking system. Most important responsibility that the Fed has is to make sure that the fifty banks that hold approximately a third of the nation’s bank deposits positive is kept secure (Grieder, 1989). The shifts that are created by the Fed in terms of the money supply changes the way in which banks respond to their consumers, which creates a great deal of responsibility and power in this one social
institution. One of the problems of the design of the Federal Reserve as a social institution is that it is separate from the political side of social construction. There is a separation from the executive branch that was designed in order to protect the economy from creating a business cycle based on political motivations. However, the Federal Reserve is then not subject to external issues that come from economic internationalization there is international economics is built on the citizens trying to get the most out of their system, but because the political system and the Federal Reserve are separate, the United States does not always have the opportunity to take advantage of outside events that could otherwise be affected by decision-making policies (Jackson, 1990). In addition, the ambiguous boundaries that exist between the legislative bodies and the Fed also help to contribute to some level of instability. According to Goodfriend (2011), this instability contributed to the economic collapse that occurred in 2008. There is some concern that the independence of the Fed means that at times it is not responsive to consumer need as much is it is focused on economic balance which may not necessarily in the best interest of the nation. Romer and Romer (2013) suggests that the problem with this social institution is that there is a belief that monetary policy has very little to do with how the economy functions. Both in the 1930s and the 1970s when recessions were experienced, the lack of understanding concerning the function of the Fed lead towards policy inaction and this resulted in poor outcomes within the economy. As a social institution, the Federal Reserve is one of the most important within the United States. The Governors on the Federal Reserve Board are given the responsibility of making decisions that will affect the way in which interest rates, loans, and the availability of the money supply can contribute to positive growth. Without good decision-making, the presence of high unemployment and low inflation could lead towards a collapse. It is the responsibility of this social institution and its board to make sure that their decisions affects the economic landscape by keeping the pressure in balance so that the economy stays stable. Unfortunately, sometimes the institution has to make decisions that will negatively affect consumers, but the intention is to create corrections that will create a more positive outcome. Even though many Americans do not know much about the Federal Reserve System, is an integral part of the creation of economy
In his First Report on Public Credit, Alexander Hamilton discusses the current financial situation of the United States and, as a response, proposes a plan to take care of the debt accrued from the Revolutionary War. Hamilton 's address tells the story of a significantly indebted newfound nation in desperate need of financial reorganization. He first discusses the strain that could be placed on public credit from public engagements and that the expensive engagement of war against Britain was the price to pay for liberty. Subsequently, he delivers his plan, which focused on the full payment of foreign loans, redemption of bonds (which would create new debt, but nonetheless establish good federal credit), and the assumption of individual state
-1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve.
Monetary Policy is another policy used in Keynesianism which is a list of protocols designed to regulate the economy by setting the amount of money that is in circulation and controlled interest levels. The Federal Reserve system, also known as the central banking system in the U.S., which holds control of this policy. Monetary policy has three tools used by the Federal Reserve to enforce this policy. Reserve Requirement is the first tool that determines the lowest amount of money a bank must possess and is not able to lend out. The second way to enforce monetary policy is by using the discount rate or the interest rate a bank will charge.
The establishment of the U.S. Constitution was an action taken in order to supply federal control over the young United States of America without replicating the mistakes and flaws present within the Articles of Confederation. The idea of the Constitution was to better unify the states, something the Articles of Confederation were completely unable to do. Even during the infancy of the Constitution, its creators were divided into two major political parties: the federalists, who supported large and strong federal government, and the Anti-Federalists who supported reserving state’s rights and limiting the grasp of the federal government. Upon the establishment and the passing of the U.S. constitution, these two parties used personal party-based
There is perhaps no other political issue in our contemporary society that is more pertinent, pervasive, and encompassing than a nation’s economy. From the first coins used in Greece and the Asia Minor in the 7th century BCE, to the earliest uses of paper money, history has proven time and time again that the control of a region’s economy is absolutely crucial to maintaining social stability and prosperity. Yet, for over a century scholars have continued to speculate why the United States, one of the world’s strongest and most influential countries, has one of the most unstable economies. Although the causes of this economic instability can be attributed to multiple factors, nearly all economists agree that they have a common ancestor: the Federal Reserve Bank – the official central bank of the United States. Throughout the course of this paper, I will attempt to determine whether or not there is a causal relationship between the Federal Reserve Bank’s monetary policies and the decline of the U.S. economy. I will do this through a brief analysis of the history and role of this institution, in addition to the central banking system in general. In turn, I will argue that the reckless and intentional manipulation of the economy by the Federal Reserve Bank, through inflation and the abolishment of the gold standard, has led to the current economic crisis in the United States.
In 1913, Wilson and Congress passed the Federal Reserve Act to make a decentralized national bank containing twelve local offices. By and large, all the private banks in every district possessed and worked that separate area's branch. In any case, the new Federal Reserve Board had the last say in choices influencing all branches, including setting financing costs and issuing money. This new managing an account framework settled national funds and credit and helped the monetary framework survive two world wars and the Great
Popularized studies of Federal Reserve performance in recent decades convey the image of the Fed seated in its Greek temple on Constitution Avenue, with Chairmen Volcker and Greenspan elevated to the realm of the gods. From centers of economic power around the nation - Wall Street, Capitol Hill, the White House, and corporate boardrooms - the classical Greek chorus intones its defense of Federal Reserve independence.
Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such control over our economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds. The Federal Reserve System is the central banking authority of the United States.
The national debt surfaced after the revolution when the United States government had to borrow funds from the French government and from the Dutch bankers. By 1790, the U.S. government accumulated millions in debt, but no one knew precisely how much. The Constitution mandated that the new government take over the debts of the old government under the Articles of Confederation.
The Federal Reserve System was founded by Congress in 1913 to be the central bank of the United States. The Federal Reserve System was founded to be a safer, more flexible, and more stable monetary financial system. Over the years, the role of the Federal Reserve Board and its influence on banking and the economy has increased. Today, the Federal Reserve System's duties fall into four general categories. Firstly, the FED conducts the nation's monetary policy. The FED controls the monetary policy by influencing credit conditions in the economy. The FED measures its success in accomplishing these goals by judging whether or not the economy is at full employment and whether or not prices are stable. Not only does the FED control monetary policy by influencing credit conditions in the economy, it also supervises and regulates banking institutions to ensure the safety and soundness of the nation's banking and financial system. The FED protects the credit rights of consumers. Thirdly, the FED maintains the stability of the financial system by controlling the risk that may arise in financial markets. Fourthly, it is also the Federal Reserve System's responsibility to provide certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation's payments system. Before Congress created the Federal Reserve System, periodic financial panics had plagued the nation. These panics had contributed to many bank failures, business bankruptcies, and general economic downturns. A particularly severe crisis in 1907 prompted Congress to establish the National Monetary Commission, which put forth proposals ...
Welfare programs are an important part of American society. Without any type of American welfare, people will starve, children will not receive the proper education, and people will not receive any medical help simply because they do not have the resources available to them. Each of the three aspects of the American welfare system are unique in their own ways because they are funded differently and the benefits are given to different people. While support for these welfare systems has declined in the more recent years, the support for it when it was created was strong.
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
I. Introduction. How to use a symposia? The "subprime crisis" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain on a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis.
How well has federalism worked in the United States? This is all a matter of opinion. Federalism has indeed been an active structure for government that fits in quite well with the changing American society. This particular system of government has been around for over two hundred years, and under all those years the separation of power under American federalism has changed numerous amounts of times in both law and practice. The United States Constitution does allow changes and amendments in the Constitution have assigned miscellaneous roles to the central and state governments than what originally intended. The suitable equilibrium between national and state powers is repeatedly an issue in American Politics.
Adam Smith wrote in his masterpiece, the wealth of nations, “It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another” (Smith, 2005). This propensity in human nature led to the development of currency – a medium of exchange accepted by a community of people. For centuries, gold and silver were used around the world as currency; in 1834 the United States, formerly on a bimetallic standard, converted to a gold de facto standard. This policy made it so the dollar was backed by gold at a ratio of $20.67 per ounce. The Gold standard was used until August 15, 1971 when President Richard Nixon