The Age Of Turbulence By Alan Greenspan

1310 WordsMar 30, 20176 Pages
After reading “The Age of Turbulence” by Alan Greenspan, the memoir truly shows the significance of our economy in the United States. Alan Greenspan, who spent eighteen-years as the chairman of the Federal Reserve, showed great efforts to assure that America didn 't experience an economic disaster. “Predicting the economic downturn that became the 1958 recession was my first forecast of the economy as a whole” (47 Greenspan). His mindset was constantly full of ideas that would make the economy more stimulated. Greenspan explains the history he has in government, other economic systems, and world issues that greatly affect the economy. He also made sure the rest of the world would grow in a way to make more opportunities for all. His main…show more content…
The Federal Reserve has many jobs to accomplish such as moderating long term interest rates to increase investment. When the economy is performing strongly, the Feds will raise interest rates in order to “slow down” the economy. This may sound like a bad idea, but in reality it must be done to ensure that our economy stays in equilibrium. We do not want our economy doing too well but we do not want it doing too poorly either. When the Feds change the interest rates the banks that borrow money from the Fed get directly affected because the loaning price of the money either lowers or rises in response to the interest rates. On the other hand, when the Fed lowers interest rates, it means the economy is performing poorly. Lowering interest rates makes money more accessible for the banks to borrow. When the Fed tightens, the stock market tends to not perform well. “While the Fed had no explicit mandate to focus on the stock market, the effects of the run-up in prices seemed to me a legitimate concern” (175 Greenspan). To explain, higher interest rates creates a lower demand for stocks, causing stock prices to fall. Lower interest rates creates a higher demand for stocks, causing stock prices to rise. When the demand for stocks fall, the demand for bonds will increase. Interest rates and bond prices are inversely related. This means that when interest rates rise, the demand for bonds fall. Alan Greenspan had a significant contribution to why our economy is the way it is
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