Bernanke on Bernanke Essay

The Federal Reserve System was signed by President Woodrow Wilson in 1913 and began operating in 1914; to this day it is still the central banking system for the United States. The responsibilities of The Federal Reserve are un-ending and complex. Due to the frequent re- occurring financial issues occurring between the years 1906-1907, like many things The Fed has had to change in numerous ways to adjust to the growing need of our expanding and evolving economy. The income for The Federal Reserve comes from interest on the U.S government securities that are acquired through open market operations (Federal Reserve education). Three major responsibilities of The Federal Reserve are stabilizing prices, interest rate adjustments, conducting investigations

The San Francisco branch of the Federal Reserve has a diversion on its site that gives you a chance to play at being Chair of the Federal Reserve. In the wake of tinkering with it, I 've arrived at a few conclusions: Modeling the economy is a mug 's diversion, fleeting loan costs are a poor instrument for guiding the economy, and I ought to never be given the employment of running a national bank.

To stabilize the economy bonds are used which release money into the market. The responsibility of the Central Bank is to maintain the health of the banking system and regulating the purchase and sale of bonds. The interest rates are controlled to balance the markets. According to the Monetary Policy Report to Congress, “The Federal Open Market Committee (FOMC) maintained a target range of 0 to ¼ percent for the federal funds rate throughout the second half of 2009 and early 2010” while representing forecasted economic decisions to rationalize low levels for longer times on the federal funds rate (Federal Reserve, 2010). Purchases were still being made by the Fed’s to result in improvements to the economy through focusing on mortgages, the real estate market, and the credit market. Predictions by the Federal Open Market Committee depicted low levels on the federal funds rates in early 2010 which would continue for some time while over time the economy would see growth, a rise in inflation, and a decline in unemployment. Feds were in agreement though they expected the recovery process to be slower. Purchases by the Federal reserve were slowed, “$300 billion of Treasury securities were completed by October” and “the purchases of $1.25 trillion of MBS and about $175 billion of agency debt” were suppose to be finished the first quarter of 2010 (Federal Reserve, 2010).

Bernanke is an adamant leader who believes in educating citizens on financial and economic literacy. Many times Bernanke was tasked with making economic decisions extremely fast. Bernanke is accredited for slashing interest rates, establishing new lending programs, extending hundreds of billions of dollars to troubled financial firms, amongst other financial decisions (Cassidy, 2008). During his tenure as chairman of the Federal Reserve, Bernanke oversaw the response to the late-2000s financial crisis, something that many never saw coming.

These programs were designed to provide short-term liquidity to financial institutions. Second, the Fed developed a set of facilities to provide liquidity directly to borrowers and investors in key credit markets such as commercial paper market, money market mutual funds, and ABS market. Third, the Fed started purchasing longer-term securities including mainly the GSE-guaranteed MBS to lower mortgage rates and to support housing activity and the broader economy.

Prior to Bernanke’s appointment as Chair, the US economy was experiencing a boom in the housing market. Interest rates were low and credit standards were lowered to capitalize on subprime mortgages.

The fiscal and Monetary step taken in the last 18 months by the U.S. Federal Reserve, The U.S. Treasury Dept., The U.S. congress and the Presidents Bush and Obama were to help stabilize the U.S. economy.

Alan Greenspan is considered a leader in both the world of economy and an influential political fiscal policy administrator. Leading by example and experience he began building his, later sought after, credentials with a Bachelor of Science Degree in Economics in 1948 and following up with Master Degree in the same area in 1950. During his pursuit of his Master’s Degree he began adding to his experience by joining an investment bank on Wall Street and then later signing on as an economic analyst with The National Industrial Conference Board in NYC. In ’54 he turned partner in a consulting firm and later president. Through associations he began working with President Nixon on his election campaign during 1968. Impressed by Greenspan, Nixon appointed

Because of Ben Bernanke as Fed administrator, he goes over once in a while in addresses three and four as supporting about everything that the Fed has done on his watch and gives careful consideration to the different reactions of his activities. In speech three he rejects the read upheld by John Taylor et al. that expansionary monetary arrangement inside the mid-2000s filled the lodging blast by referring to the instances of states like fire and Espana that had lodging blasts while not expansionary financial strategy. In any case, there's a considerable collection of evidence to the very certainty that expansionary monetary framework has been a significant tributary issue to a few lodging blasts inside the previous century ( Bordo and Landon Lane 2013). The creator also skates over the Lehman Brothers crumple. There's no exchange of the

The article, "Greenspan gets another Fed term," in the New York Times discussed Alan Greenspan's success and failures during his term. The article was fairly easy reading. I found some statements to be quite amusing however, there were some issues discussed that was a little ambiguous.

In Justin Martin's book Greenspan: The Man Behind Money, the life of Dr. Alan Greenspan, a man whose expertise in economics has dramatically influenced the state of the U.S. economy, is told from a historical perspective and in a semi-chronological order.

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

In November 2010, the second stage of quantitative easing announced. The Fed continues to purchase long-term bonds for $600 billions. [1] This action caused the bubble in the US currency. Many of the counties started to own fewer US dollars, and acquired more gold and natural resources. As the results, in 2010, the price of gold and gas were gone up by close to 28%, and the US currency started to depreciate. [1] In September 2012, the Fed announced that they would continue to buy long-term bond at $85 billion per month, but at the same time the Fed would start to sell their short-term bond. [1] By selling short-term bonds, it would lower the long-term market interest rate and decrease the earnings of the long-term bonds. As we can see, the reason Fed continuously used quantitative easing, as monetary policy in recent six years is their goals that have not reached. Even though, the Fed increased rapidly on the monetary base, the multiplier was decreased more than the increasing on the monetary base. As the results, the money supply was still shrinking, and the economy was still in recession. However, in 2013, the Fed announced that they would continue to increase the money supply until the unemployment rate falls below 6.5% or the core inflation rose above 2.5%. [1] By doing this, the Fed continues to increase the inflation rate, and depreciates domestic currency. With higher inflation rate, the real deficit would be dropped.

Then Bernanke’s thoughts and the extent to which his view can be connected to the economic crisis will be presented using both economic theory and other economists’ ideas.

What strengths and what shortcomings do you see in the approach that Central Bank is taking to fill this position? Justify your answer.