Monetary Policy, Asset, And Consumption Essay

For this assignment I picked “the role of the Federal Reserve” a mere recital of the economic policies of government all over the world is calculated to cause any serious student of economics to throw up his hands in despair (pg, 74). The Federal Reserve is now in the business of enforcing the United States government’s drug laws, even if that means making a mockery of both state governments’ right to set their drug policies and the Fed’s governing statutes. A Federal Reserve official who played a key role in the government 's response to the 2008 financial crisis says the government should do more to prevent a repeat of that crisis and should consider whether the nation 's biggest banks need to be broken up. Neel Kashkari says he believes the most major banks still continue to pose a "significant, ongoing" economic risk. The next ten years will see an explosion of government debt and an implosion of government’s ability to fulfill its promises. Any economic or investment model based on past performance under previous economic conditions will be worthless just as useless as the Federal Reserve’s models.

During the Federal Reserve meeting in April 2016, the range was left unchanged for federal funds at 0.25 percent to 0.5 percent (TRADING ECONOMICS, 2016). Labor markets experience growth confirmed by policy makers, yet economic activity was monitored as being slow (TRADING ECONOMICS, 2016). The risks associated with the financial developments of the country have ceased (TRADING ECONOMICS, 2016). The average percentage of interest rate in the U.S. averaged at 5.8. March of 1980 a record high was recorded at 20% (TRADING ECONOMICS, 2016). The lowest interest rates were recorded in the month of December 2008 at 0.25% (TRADING ECONOMICS, 2016).

The Gross Domestic Product (GDP) is a calculation that provides insight into the current economy of our nation to allow individuals to understand the current and past year’s standings in the economy. The calculation of the GDP allows for the government to determine what adjustments are necessary to manage an effective status for the economy. Based upon the GDP the government can forecast any necessary changes that must be made to either the monetary policy or the fiscal policy. The wealth of a country is based upon the government’s ability to manage the economy through the monetary system and not on the amount of money that is located within that economy. The calculations for the GDP are produced to provide the most

The Progressive Era, from 1901 to 1918, was centered on change. There were four main goals of Progressivism: protecting social welfare, promoting moral improvement, fostering efficiency, and creating economic reform. President Woodrow Wilson, elected in 1912, made the most important change of the early 1900s; he passed the Federal Reserve Act.

Mr. Emanuel, in the current economic climate, the Obama administration’s course of action has been to pursue aggressive countercyclical fiscal policies designed to prevent further economic deterioration. Critics of these policies argue that:

In 1913, the United States Congress created the world’s most powerful monetary system, called the Federal Reserve (Investopedia). It involves one central agency and twelve regional Federal Reserve Banks that are accountable for their designated areas in the United States (Investopedia). Its primary purpose was to establish a secure, malleable, and a solid financial system which was to prevent financial devastation during times of crisis (Investopedia). More specifically, prior to the creation of the Federal Reserve Bank, the United States had bouts of crisis that created panic among the citizens. In utter terror, people would withdraw their funds from their banks causing a domino effect of financial institutions being pushed out of business due to a deficiency of money (stlouisfed). Therefore, the Federal Reserve Act was endorsed as a resolution to crisis periods, providing a money supply that would balance the economy, and introduce Federal Reserve Notes as a form of new currency (stlouisfed). In essence, the Federal Reserve became fully responsible for developing a comprehensive banking system that would allow for a strong economy. Therefore, one must understand the structure, the function, and the future of the Federal Reserve Bank that continues to financially secure this great country.

Monetary Policy, in the United States, is the process by which the Federal Reserve controls the money supply to promote economic growth and stability. It is based on the relationship between interest rates of the economy and the total supply of money. The Federal Reserve uses a variety of monetary policy tools to control one or both of these.

     With America in recovery from the attacks on our freedom and our economy, many wonder if we will return to phase one (expansion) and how long it will take to reach phase two (recession) again. The Keynesian Theorists of America believe that the government should actively pursue Monetary policies (enacted by the Federal Reserve Bank) and Fiscal policies (enacted by Congress) to reach adjustments to price, employment, and growth levels. In our full market economy, we must use these economic policies to control aggregate demand. When these policies are used to stimulate the economy during a recession, it is said that the government is pursuing expansionary economic policies.

The recent recession lasting from 2007 until 2009, and the effects of which are still highly visible in the U.S. economy, led the Federal Reserve to use new and largely untested methods for protecting the country from a total financial collapse. The new strategy, which blurs the lines between monetary and fiscal policy, had been attempted only once before, and is open to criticism from several difference angles. This report documents the history, purpose, and controversy surrounding quantitative easing as a strategy to mitigate the effects of the recent recession. After considering these factors, the conclusion is drawn that quantitative easing was a modestly successful policy, yet one which should not be employed again. Although

The U.S. never fully recovered from the Great Depression until the government employed the use of Keynes Economics. John Maynard Keynes was a British economist whose ideas and theories have greatly influenced the practice of modern economics as well as the economic policies of governments worldwide. He believed that in times when the economy slowed down or encountered declines, people would not spend as much money and therefore the economy would steadily decline until a depression occurred. He proposed that if the government injected money into the economy, it would help stimulate consumers to purchase more and firms would produce more as a result, in a continuous cycle. This cycle is called the multiplier effect. Keynes ideas have

Quantitative easing refers to the practice of pumping money into the economy of a nation so that the banks are encouraged to lend. The government injects money into the economy with the hope that people and companies will be able to sped more. There is a greater chance for an economy to spring back to life when there is increased spending.

The Economy is the backbone to society. There are many factors that operate in, and govern our society’s economical structure. Factors such as scarcity and choice, opportunity cost, marginal analysis, microeconomics, macroeconomics, factors of production, production possibilities, law of increasing opportunity cost, economic systems, circular flow model, money, and economic costs and profits all contribute to what is known as the economy. These properties as well as a few others, work together to influence the economy. Microeconomics and Macroeconomics are two major components. Both of these are broken down into several different components that dictate societal norms and views.

The China’s central bank began to roll out money policy as the People’s Bank of China sold three-month bills at a higher interest rate for the first time in 19 weeks, as reported by Bloomberg (2010). The central bank previously have loosen monetary policy as it kept its benchmark one-year lending rate at a five-year low of 5.31 percent after five reductions in the last four months of 2008 and in the first 11 months of 2009 allowed a record 9.21 trillion of new bank loans.

Secondly, the fixed dollar-pegged exchange rate system and monetary policy, the independence of the existence of a fundamental conflict, undermine the effectiveness of monetary policy cannot meet the needs of economic development. Monetary policy autonomy is essential for China’s macroeconomic stability; monetary policy should take precedence over the independence of significant exchange rate stability. But the Yuan against the U.S. dollar exchange

For the past 15 years, China has been in the limelight as one of the world’s fastest growing economy. The International Monetary Fund (2014) reported China’s average growth rate at an average of 10% over the past 30 years. The market economy of China is the world’s second largest economy by nominal GDP based on the World Bank Data. In spite of this fast growing economy, the country, like any developing country has experienced rough inflationary dynamics, and to target this, a mix of Monetary Policies have been adopted. Reserve Ratio Requirement (RRR) has an evolving role as a Monetary Policy tool to target these inflations. Ma, et al. (2011), presented that The People’s Bank of China (PBC) has actively changed its