Marchand: Difference between revisions
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The Fed feels that their job is to keep prices stable for as long as possible because this fosters higher saving rates and investment. When adverse supply shocks and other detrimental acts toward our economy occur, the Fed helps by restraining inflation pressures and attempt to keep unemployment low to prevent high inflation. The Fed must also decide whether to give in to defusing price pressures or "cushioning the loss of employment and output." | The Fed feels that their job is to keep prices stable for as long as possible because this fosters higher saving rates and investment. When adverse supply shocks and other detrimental acts toward our economy occur, the Fed helps by restraining inflation pressures and attempt to keep unemployment low to prevent high inflation. The Fed must also decide whether to give in to defusing price pressures or "cushioning the loss of employment and output." | ||
Though the Fed may be to blame for the events of the great depression, Volcker's policies to end the stagflation of the late 1970s by limiting money supply were excellent. He successfully abandoned interest rate targeting and used the Feds ability to limit the money supply to quell inflation. Though it did come at a price with a nasty recession in the early 1980s, inflation has been low ever since and his policies were considered a success. | |||
Revision as of 02:20, 7 December 2006
The Good of the Federal Reserve
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The Fed serves beneficial to today's monetary climate because of its ability to quell inflation and reverse poor economic markets. The Fed has control over interest rates and the amount of money available for the market. It can buy and sell securities to help deflate or inflate the economy as it sees fit. On their website, the Federal Reserve sets out their goals for monetary policy. Accordingly, they are spelled out in the Federal Reserve Act, the act that originally gave them their power, which states that the board of governor's should seek to "promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
The Fed feels that their job is to keep prices stable for as long as possible because this fosters higher saving rates and investment. When adverse supply shocks and other detrimental acts toward our economy occur, the Fed helps by restraining inflation pressures and attempt to keep unemployment low to prevent high inflation. The Fed must also decide whether to give in to defusing price pressures or "cushioning the loss of employment and output."
Though the Fed may be to blame for the events of the great depression, Volcker's policies to end the stagflation of the late 1970s by limiting money supply were excellent. He successfully abandoned interest rate targeting and used the Feds ability to limit the money supply to quell inflation. Though it did come at a price with a nasty recession in the early 1980s, inflation has been low ever since and his policies were considered a success.
