What the world needs now is Money Sweet Money"; that is not the way the song goes however that is surely the way our world and economy does. Money and its importance relative to the US Government have always been difficult to figure out especially when it comes to interest rates. Due to our Federal Reserve System, its chairman Alan Greenspan, and his Board of Governors dedicated to seeing that our economy blossoms, those doubts have become a thing of the past, for now.
The Federal Reserve System is a central banking of the US Government, most commonly known as the Fed. A central bank serves as the banker to both the banking community and the government. It issues the national currency, conducts monetary policy, and plays a major role in the supervision and regulation of banks and bank holding companies. Congress created the Fed in 1913. It was designed to ensure political independence and sensitivity to the many different economic concerns. The chairman and the six other members of the Board of Governors who oversea the Fed are nominated by the President of the United States and confirmed by the Senate. There are twelve District Reserve Banks, subsequently located in Boston, New York, Philadelphia, in Richmond, VA. In Atlanta, GA., Cleveland, OH. St. Louis and Kansas City, MO., Chicago, Minneapolis MI., Dallas, TX. And San Francisco. Each bank is responsible to a 9 member Board of Directors, which is set in a three-class system. The three classes are defined as A, B, and member banks elect C. Class A and the Board of Governors appoints B Directors and Class C. The Board of Directors is responsible for the administration of its banks and the appointment of the banks president and vice-president. This process is set from the base...
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In conclusion, the job of Mr. Greenspan and the Federal Reserve is not an easy one. Whenever money is involved there is always great potential for problems. With the monetary policy always an issue, Mr. Greenspan has to constantly come up with ways to keep our economy steady despite changes nationally and internationally. This recently became a relevant factor. At the very moment Mr. Greenspan was expected to accept his ultimate reappointment as Chair of the FED he was in the process of making it painfully clear that he was not going to allow the rapidly growing economy to foster inflationary imbalances that would undermine the economy's record economic expansion. This and other important factors caused several short-term interest rate increases. This saga continues but the FED with all they have to do has steadily maintained an economy to be proud of for now.
According to federalreservehistory.org “The Federal Reserve is about the Central Bank of the United States it was created by Congress to provide the nation with a safer, more flexible and more stable monetary and financial system. The Federal Reserve was created in 1913 with the enactment of the Federal Reserve Act” (federalreservehistory.org). According to investopedia.com “the Fed is headed by a government agency in Washington known as the Board of Governors of the Federal Reserve. There are 12 regional Federal Reserve banks located in
-2. The background of the financial crisis.—what kind of monetary policy the federal reserve made?
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.
Another federal legislation that was passed into law during the period was the Federal Reserve Act. The Federal Reserve Act of 1913, focused its energies on creating a new banking system with twelve regional Federal Reserve Banks, and each of whom were owned by member banks in its district. Also, all of the national banks automatically were members while state banks could join if they wished.
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
Greenspan is abusing his place and should let the currency flow into the market rather then hold back. Sure, Smith would say some mediation is necessary to keep too much money from pouring in so inflation doesn’t occur. Smith believes that the economy should be free from the government yet the government should still silently oversee it to prevent any problems. Greenspan is preventing problems but is being too cautious and Smith would want him to let more currency into our market but still keep it from getting out of control. My view on this matter is quite similar to that of Adam Smith’s view on the matter. I also feel that an economy should be allowed to flourish and grow to its fullest capacity. As the article illustrates, inserting more money into the economy will certainly cause the economy to grow and also help fix the unemployment rate. So I feel that Greenspan should loosen his control over the money and let more currency be distributed into the economy.
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 a 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.
Alan Greenspan took office June 19, 2004, for a fifth term as Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. He originally took office as Chairman and to fill an unexpired term as a member of the Board on August 11, 1987. Dr. Greenspan was reappointed to the Board to a full 14-year term, which began February 1, 1992, and ends January 31, 2006. He has been designated Chairman by Presidents Reagan, Bush, Clinton, and Bush.
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
Of course money isn't always everything, but when measuring our national success as a country it is the only thing people consider. The government uses income to judge the economic well-being of its people. Believing that the more money people make, the more money they will spend. People tend to spend more money on better food, clothing, housing, and medical care, which are all factors that contribute to helping the economy.
The term Monetary policy refers to the method through which a country’s monetary authority, such as the Federal Reserve or the Bank of England control money supply for the aim of promoting economic stability and growth and is primarily achieved by the targeting of various interest rates. Monetary policy may be either contractionary or expansionary whereby a contractionary policy reduces the money supply, reduces the rate at which money is supplied or sets about an increase in interest rates. Expansionary policies on the other hand increase the supply of money or lower the interest rates. Interest rates may also be referred to as tight if their aim is to reduce inflation; neutral, if their aim is neither inflation reduction nor growth stimulation; or, accommodative, if aimed at stimulating growth. Monetary policies have a great impact on the economic stability of a country and if not well formulated, may lead to economic calamities (Reinhart & Rogoff, 2013). The current monetary policy of the United States Federal Reserve while being accommodative and expansionary so as to stimulate growth after the 2008 recession, will lead to an economic pitfall if maintained in its current state. This paper will examine this current policy, its strengths and weaknesses as well as recommendations that will ensure economic stability.
Money supply is the availability of money in the hands of the public (economy) that can be used to purchase goods, services and securities. In macroeconomics, the price of money is equivalent to the rate of interest. There's an inverse relationship between money supply and interest rates. As money supply increases, interest will decrease. On the other hand, interest will increases as money supply decreases. It is very important to understand that the economy works at market equilibrium. There are several factors affecting money supply; and these contributing factors will be the main focus of this paper. Understanding the basic principle on money supply is imperative to have a good grasp on the macroeconomic impact of money supply on business operations.
Batra, Ravi. Greenspan's Fraud: How Two Decades of His Policies Have Undermined the Global Economy. New York, NY: Palgrave Macmillan, 2005.
According to the article, from September 2014 to September 2015, the economy had fallen 7.1% and inflation rose 141.5%. This is not the worst of it either, as it is predicted that inflation will rise to 720% this year and the economy will contract by 10%. The ability for a state to maintain their economy is perhaps the most crucial task, because without money, the state has no ability to protect people, resources, and territory. They are currently in a 20% deficit to their GDP, and their liquid international reserves have fallen to 1.5 billion dollars. The importance of money to a state cannot be overlooked, as it controls all aspects of daily life for the people.
“Money is number and numbers never end if it takes money to be happy your search for happiness will never end.” (Bob Marley). For the majority of people in our modern-capitalist world, money is the first thing, and sometimes the only thing that measures success in life. Money can buy power. Money can buy fame. Money can buy time. Sometimes money can even buy a life. So money has become the first common goal for everybody. There are many different perspectives, and how people view the world, in terms of success, and money. Money is not the root of all evil, but the love of money is the root of all evil.