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Some Republican presidential aspirants have demonstrated open rejection of the Federal Reserve System. They have sited the US economic crisis as turmoil that emanated from poor policies guiding the Federal Reserve. These politicians seem to use arguments floated by some economists who believe that the Federal Reserve System is a burden to the American people (Meltzer 199). Ideally, presidential politics does not only shape the future of Americans, but also influence the global economic balances. US economy is a central factor in US politics because it influences the taxation programs, international relation, domestic social welfare, and the satisfaction of basic human needs by the American citizens. The US politics in the global scale depend on its economic power. Thus, politics concerning the US economy does not only influence the lives of US citizens, but also the conditions of life in other countries (Wells 2). For instance, the US economic crisis reverberated to international scale shaking the global economy. The concern of the US political aspirant is to restore faith to the public.
Banking regulations influence the flow of currency, which subsequently affect money market. These restrictions influenced banking system in US in early 1900s leading to the creation of the Federal Reserve System in 1913 (Wells 2). The system came into operation in 1914 November. The intention of the Federal Reserve Act was to create an alternative source of bank and currency reserve, which could control panics when money supply in the market increased because of the need to expand business. History records that during the great depression, Federal Reserve failed to discharge its duty. About 9000 banking institutions collapse during that great period (Wells 3). Changes that Fed has developed over time in response to economic challenges has made many observers to believe that, Fed has on
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It strives to be as realistic as possible by considering events that took place since the latest economic recession in 2008. Many unfavourable events affected the Fed since then. Recommendations for improvements in the roles of the Fed were included. There were significant initiatives by the Board of Governors since mid-2012.
The structure, roles and the responsibilities of the Federal Reserve has undergone rapid changes over the years which have been mainly stimulated by the events like the Great Depression, Global Financial Crisis, etc. The structure of the Federal Reserve System is composed of a governing board, the open market committee, regional Federal Reserve banks, privately owned banks in US and the advisory councils.
They jointly implement the monetary policy which is set by the Federal System. Every Federal Reserve banks governs the regulation of commercial banks in their district. Alexander Hamilton, the first secretary of treasury of United States, proposed the idea of instituting a National Bank in order to develop the country in terms of all the financial aspects.
It is apparent that while the housing market is still mired in an extended slump and the number of vacant homes are increasing by the day, the economy is merely in bad, not terrible shape. The article succinctly states that the economy "is limping rather than slumping".
Similarly, an increase in the money supply increases the cost of loans and people spend less. This reduces the money supply in the economy. Similarly, when interest rates decrease the exact opposite happens and money supply in the economy increases.
1b) Open-Market Operations: In this method, the sale and purchase by central bank in the security market has desired effect on the money supply in the economy.
This institution has been hated by many since its birth in 1913. It is an open question whether the Fed should exist at all and what would happen after its demise.
The Fed emerged out of crisis and manages crisis with monetary policy. The Fed was created in 1913 to
The article comprehensively discusses the main policies that had been taken by the Federal government during the sluggish phase of 2008-2013 to restore equilibrium in the recessionary economy. The conventional monetary policy of the Federal Reserve was mainly based on targeting the federal funds rate.