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The principal way that the Fed manages the economy and financial crises is to manipulate the money supply. The Fed does its work by adjusting three things: the reserve requirement, the discount/federal funds rates, and open market operations.
There are a number of positive outcomes that can result if the Fed was abolished. One positive outcome is the end of the yo-yo monetary policies that leads the country to move from recessionary to inflationary periods. A second positive outcome is greater competition and safer investment among financial institutions.
There are negative outcomes to ending the Federal Reserve. The principal negative outcome is that the business cycle will run unchecked. Financial crises will tear the nation apart even more than already do.
The United States has wrestled with the idea of centralized banking since its birth. After suffering through serious financial crises in the 1880s and early 1900s, the United States settled on the Federal Reserve system.
The country embraced central banks twice before creating the Fed. The country created the First Bank of the United States in 1791 and then let the charter lapse in 1811. Congress created the Second Bank of the United States in 1816 and then let that charter lapse in 1828 (The Federal Reserve, 2010). Both banks failed because they were seen as answering to big city money interests and not the ordinary agrarian citizen. (The Federal Reserve, 2010). Today the Fed is also associated by some with big financial conglomerates.
The United States created the Fed after enduring a series of financial crises. Several banking panics rocked the country in the late 1800s and early 1900s. The United States took action after the panic of 1907. In that year, the nation faced a dire banking crisis caused by speculation. Private industry, led by J.P. Morgan, had to step in to save the economy. The government created an independent government body, the Fed, in
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(“Ending the Federal Reserve Essay Example | Topics and Well Written Essays - 2250 words”, n.d.)
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(Ending the Federal Reserve Essay Example | Topics and Well Written Essays - 2250 Words)
“Ending the Federal Reserve Essay Example | Topics and Well Written Essays - 2250 Words”, n.d. https://studentshare.org/miscellaneous/1564358-ending-the-federal-reserve.
Indeed, its confusing structure, organization, and responsibilities make it difficult for American's to understand. In explaining the Federal Reserve, the New York Times describes it as having, “exercised more influence over economic growth and the level of employment than other government entity.”
1): 1. Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. 2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
In simple terms, the Federal Reserve came into being by enactment of the Congress. Consequently, the Congress has the obligation of overseeing the monetary policy and the Federal Reserve. This paper analyzes the importance of the Federal Reserve and strategy in stabilizing the economy of the country.
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 worth noting that the collapse of the mortgage market was necessitated by Fed lax on the money market. The Federal Reserve addresses the economy by regulating financial institutions, setting monetary policies and operating the countries payment systems.
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.
The key objectives of the monetary policy are stipulated in the Federal Reserve Act. This act asserts that the Federal open Market Committee and the Board of Governors should always strive to promote the goal of stable
7 Pages(1750 words)Essay
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