The Fed and Interest Rates
Dave Pettit of The Wall Street Journal writes a daily column that appears inside the first page of the journal's Money & Investment section. If the headlines of Mr. Pettit's daily column are any accurate record of economic concerns and current issues in the business world, the late weeks of March and the early weeks of April in 1994 were intensely concerned with interest rates. To quote, "Industrials Edge Up 4.32 Points Amid Caution on Interest Rates," and "Industrials Track On 13.53 Points Despite Interest-Rate Concerns." Why such a concern with interest rates? A week before, in the last week of March, the Fed had pushed up the short-term rates. This being the first increase in almost five years, it caused quite a stir.
When the Fed decides the economy is growing at too quick a pace, or inflation is getting out of hand, it can take actions to slow spending and decrease the money supply. This corresponding with the money equation MV = PY, by lowering both M and V, P and Y can stabilize if they are increasing too rapidly. The Fed does this by selling securities on the open market. This, in turn, reduces bank's reserves and forces the interest rate to rise so the banks can afford to make loans. People seeing these rises in rates will tend to sell their low interest assets, in order to acquire additional money, they tend move toward higher yielding accounts, also further increasing the rate. Soon this small change by the Fed affects all aspects of business, from the price level to interest rates on credit cards.
Rises and falls in the interest rate can reflect many changes in an economy. When the economy is in a recession and needs a type of stimulus package, the Fed may attempt to decrease the interest rates to encourage growth and spending in the markets. This was the case from 1989 until last month, during which the nation's economy was generally considered to be in a slight to moderate recession. During this period the Fed tried to keep interest rates low to facilitate growth and spending in hard times. However, when inflation is increasing too quickly and the economy is gaining strength, the Fed will attempt to raise rates, as it did late last March. This can be considered a sign that we are pulling out of the r...
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..."slight" increase as opposed to one of "somewhat greater" magnitude. This article is interesting because it shows that even the Fed can be uncertain about what is best for the economy, but it still focuses on the power of Allen Greenspan, as well as the committee as a whole. It compares the two arguments of each method, and shows a weakness in the Fed that may have been unknown to the reader before.
The Wall Street Journal (Mon. April 11, 1994) - "Fed Moved Too Slow On Increasing Rates"
This recent article criticizes the Fed's actions in raising the interest rate, and complains that the Fed has fallen behind in it's job. It discusses the plan for a "Neutral" policy and what the Fed has tried to do and not do to maintain this so called policy. It argues the motives and reasons for wanting a lower interest rate and compares past decades to today's standings. Overall it focuses deeply on the need to check inflation and if it is valid. It shows that the Fed tends to take a more conservative approach to the economy than some analysts would prefer, but that the Fed will probably continue to raise interest rates.
Some economists blame the Federal Reserve’s inaccurate monetary policy. The easy-monetary policy since 2001 was deviating from the Taylor rule. (Alex, 2013)
Two-hundred and ten years ago, the country of France was rapidly changing, whether for better or for worse was not yet known. At this time, young Napoleon Bonaparte was leading his fledgling empire in France. He was challenging all the laid down rules and regulations that had been in place within his country and Europe for hundreds of years. This year, however, he would enact a set of laws known as the Civil Code, which was later called the Napoleonic Code. This set of laws was one of Napoleon’s longest lasting effects on the world, as it “is still in effect today, and has served as the model for many other national codes, especially in Europe” (Princeton Review). It was this set of laws that laid down rules and guidelines that are seen as normal in a modern day sense, such as that all men are equal. These concepts were brand new to the period, and no leader had ever allowed such idea to be enacted. It went against what the kings and queens in Europe had fought so hard to maintain, the idea that aristocrats and priests were above commoners, and more importantly, above the law. The Civil Code would forever change the way the French governed their people, and how those people were represented in their government. One of the most significant aspects of it was that it protected private property, as well as restoring power to the males of the family. At this time, France was a country where you were born into your wealth and social status. However, this all changed with the Napoleonic Code as well. The society began moving towards a “merit-based society in which individuals qualify for education and employment because of talent rather than birth or social standing” (Bentley pg. 792). Among other things, the code improved education with...
Popularized studies of Federal Reserve performance in recent decades convey the image of the Fed seated in its Greek temple on Constitution Avenue, with Chairmen Volcker and Greenspan elevated to the realm of the gods. From centers of economic power around the nation - Wall Street, Capitol Hill, the White House, and corporate boardrooms - the classical Greek chorus intones its defense of Federal Reserve independence.
The Discount Rate increased in small numbers during the first five months in 2000. This would most likely mean that the Fed (Federal Reserve System) was trying to build their reserves which would discourage commercial banks from borrowing from Federal Reserve Banks. This is known as a tight money policy when the overall objective is to tighten money supply to reduce spending and control inflation. The remainder of the year in 2000 the Discount Rate stayed at 6%, which is the highest point during 2000-2001.
First of all, the greatest success of Napoleon's rule was his introduction of a unified national legal system. The Napoleonic code (introduced 1804) was a success since it preserved the social aims of the revolution such as equality in the eyes of the law and also guaranteed civil liberties like freedom of religion. Furthermore, the code couldn't be challenged by regional traditions and local rights, thus unifying the country under
We feel that the latter is on the radical side of thinking, and that overall the Federal Reserve has the best interest of the nation and international economy in all their decisions regarding the increases in interest rates, etc. Since the onset of the Federal Reserve, we have not gone into a major depression, and over the course of time there will be times when our economy will peak and boom and the Fed will feel that it is time to slow the economy by raising the rates. Bibliography FED 101 Hosted by the Federal Reserve Bank of Kansas City. http://www.kc.frb.org/fed101 Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960.
The biggest and the most important thing that Napoleon did in order to preserve the French Revolution was the Napoleonic Code or the Civil Code of 1804.
Press Release. (2012, January 11). Retrieved May 23, 2012, from Board of Governors of the Federal Reserve System: http://www.federalreserve.gov/newsevents/press/other/20120110a.htm
Sprague, O.M.W. “The Federal Reserve Act of 1913.” The MIT Press 28.2 (1914): 213-254. JSTOR
United States Federal Reserve. (February 11, 2014). Monetary Policy Report. Retrieved June 18, 2014, from http://www.federalreserve.gov/monetarypolicy/mpr_20140211_summary.htm
College allows the student to choose their own path in life and not just take any job they can get. For instance, I have always wanted to teach and I like the added perk of having the summers off. Obtaining a degree will ensure that you earn your maximum earning potential. On average a person that has their Bachelor degree earns about $15,000 a year more than high school graduates, while associate degree holders make about $7,000 a year more (Graff, They say / I say: the moves that matter in academic writing, 2014, pp. 208-225). However, over time the gap significantly widens to almost $50,000 a year, in favor of the college degree holder. Some might would argue that not all degrees are equal with some paying significantly less. I agree that the type of degree one receives directly impacts their salary, but the benefits of obtaining a degree are still valuable. In an article written by Terry Caron, his researched showed that unemployment rates significantly decreased the more education an individual received (Caron, "College Graduates vs. Non - College Graduates: Unemployment Statistics.")As Freeman Hrabowski mentions, “College graduates are much more likely to be employed than those with only a high school diploma and earn substantially higher salaries” (Graff, They say / I say: the moves that matter in academic writing, 2014, pp. 259-263).
Interest-rate stability is very important for the Fed to control because otherwise consumers, like you and I, will be reluctant to buy things like houses due to the fluctuation which will make it harder to plan for the future.
Many people interact verbally as well as nonverbally. However, two major roles are present when verbally communicating. In order to effectively communicate, one must know how to speak adequately as well as listen efficiently. Listening is the main focus since according to the textbook, the average person spends more time listening than anything else. Listening is described as the “process of selecting, attending to, creating meaning from, remembering, and responding to verbal and nonverbal messages.” Though listening is such an effective part of communicating, it a skill that can greatly be improved in my
First, going to college makes someone more hirable. A little more than fifty percent of the United States population makes up the middle class. Many future employees think that out of high school, they can acquire a middle class job, “[y]et look at the qualifications for just about any middle-class job: They start with a bachelor’s degree” (Skinner 1). Having a college degree will only help in the very competitive job market today. Not only does a college degree show experience, but it also shows resilience. In addition, a job that requires a college degree will earn more money in the future. A college degree can be extremely valuable when it comes to salary. According to John Cassidy’s article, when it comes to salary, “There’s no doubt that college graduates earn more money, on average, than people who don’t have a degree” (Cassidy 2). Its no conspiracy that one with a college degree earns more compared to someone that doesn 't have one. This can be backed up with facts: “in 2005, the average earnings of college graduates had risen to more than seventy thousand dollars, while high-school graduates had seen their earnings fall slightly from forty-five thousand dollars” (Cassidy 2). Finally, a college degree not only benefits the individul but the economy and surrounding environment as well. The main goal is to leave college with skills that can transfer into the real
Whether or not to attend College after graduating High School is an important decision in a young person’s life. There are a number of factors to consider such as funds, grades, and other social issues that must be considered. The government offers different types of funding for students such as Pell grants and student loans. This helps everyone to be able to attend some college, even if it is just the local Community College in the area. Attending College is the best option for most High School graduates, which will enable them to earn their maximum potential income, while also preparing them to make well informed decisions throughout their lifespan. College can also help to improve a person’s social skills and provides a multitude of life