The course that I took this term on money and banking was of great value to me. It taught me some very important things. One of the most important things that I learned in this course was that the Federal Reserve is the best resource for information concerning the economy. Another important thing that I learned was that interest rates mean different things to different people. A third very important thing that I learned was how a financial crisis can start in the United States.
There is an abundance of information about our economy on the television newscasts, in the newspapers, and on the Internet. A lot this news is very confusing, particularly when one article contains information that conflicts with another article. This sometimes happens within the same day. One day you may be watching the news and hear that the interest rates and inflation will be rising soon and rapidly, and the next minute you hear the interest rates and prices will remain steadily under control for some time. To complicate things even further, the news is oftentimes clouded with opinions or biases. I have learned in this course that the best way to get an accurate account on issues concerning the economy is to go straight to the source, which is the Federal Reserve.
The Federal Reserve System makes it their business to know where the economy is headed and how monetary policy may affect the economy. Goals of the Federal Reserve System include high employment, economic growth, and the stability of financial markets, foreign exchange markets, prices, and interest rates. That being said, it became obvious to me that the Federal Reserve System is the proper resource for matters concerning the economy. I can access their website anytime to find the la...
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...t up to par. The mortgage brokers allowed many high risk borrowers to obtain loans that they could not afford. When the price of houses fell, the values of these homes were well below what was owed for the mortgages. This caused many borrowers to default on their loans. Before we knew it, the balance sheets of banks deteriorated, the stock market crashed, and large investment banks began to fail. This was all started with financial innovation that had gone out of control.
Well, it was really difficult to pick just three things that I felt were the most important things that I learned in this class. I actually learned more in this class than any other class that I’ve taken in my degree program at this point. Every single topic was interesting, relevant, and important. The three things that I picked as most important to me have made the biggest impression on me.
-1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve.
Leading up to the crisis of the housing market, borrowers got mortgages without understanding the terms. Banks were giving out loans to people the banks weren't sure could pay the money back. The closer to the crisis, the higher the frequency of illegitimate loans and mortgages. Because there were so many mortgages on houses that could not be paid back, millions of mortgages were foreclosed on, and the houses we...
Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds.
To understand the trap, it is important to understand how the central bank works. The United States created the Federal Reserve System in 1913 after several financial panics revealed that a centralized control over the monetary system was needed. The Federal Reserve Act stated three primary objectives for U.S. monetary policy, which were to stabilize prices, maximize employment and controlling long-term interest rates. In later years, the Federal Reserve was also assigned additional duties, including maintaining
Without a doubt the lessons and exercises on time management were the most meaningful to me. They brought insight into why I seemed to be constantly working yet still never really got anything I wanted to accomplish throughout the day finished. I realized the majority of the activities I had been spending the most time on didn’t reflect my values of hard work and self discipline and long term academic goals to be successful in college. This motivated to completely change the way I managed my time by effectively striking a balance between my maintenance, committed, and free time.
The biggest lesson I learn during this class is time management. I have a 9 month old baby and he allows wants my attention. I had to rely on a family member to take care of him while I get a few hours to read the textbook and do the writing assignments. I had to truly focus on my work and not go to social sites because I barely had time to do so.
In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).
To put it simply, banks gave out mortgages to people who didn’t qualify and couldn’t afford to keep up with the payments, then banks bundled the mortgages into bonds and sold them to top investors and financial institutions that were told were safe and secure investments. The bonds quickly lost their value when they were not getting paid and this caused huge investment losses from the top financial institutions. This quickly turned into a domino effect, which caused the entire economy to suffer big. People in turn lost jobs, houses and money because these big financial institutions went
Sandler further mentions that the housing market collapse which was eventually caused by irresponsible lending practices should not have come as a surprise especially in lieu of the Fed’s rate hike which was implemented as a means to control inflation. The author highlights that neither credit agencies, banks nor the Federal Reserve anticipated many key factors which culminated in the crisis. Some of these factors which are mentioned in this work are a) The large volume of poorly underwritten mortgages and the high fees which were being levied from unqualified borrowers b) The assumption that housing prices would continue to rise and c) the global impact of mortgage origination and validation
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
The first important concept I learned was the ‘goals of monetary policy’. The primary goal of a central bank is price stability (low and stable inflation). Some of the Feds (short for the Federal Reserve Bank) other concerns are:
What is the most important concept that you learned in this class? Write this for a reader who is unfamiliar with the concept.
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
Impact of monetary policy on the economy a regional Fed perspective on inflation, unemployment, and QE3 : Hearing before the Subcommittee on Domestic Monetary Policy and Technology of the Committee on Financial Services, U.S. House of Representatives, One. (2011). Washington: U.S. G.P.O.
Personal Finance is a class I’ve wanted to take for a while now. My major is Finance not because I want a career in finance but more to learn about finance for my own personal situation. This class taught me so much! During this class I was able to evaluate my financial situation and set financial goals for myself. The four topics that helped me the most were emergency savings, buying a car, purchasing a home, retirement, and estate planning. After completing this class I have a better understanding of these topics and how to achieve my financial goals.