The Federal Reserve

The Federal Reserve

The Federal Reserve and the policies they have implemented in the last 20 years, here we take a look at how the Federal Reserve has handled the US economy in the last 20 years, how they have handles the interest rates and required reserve, how their actions have affected the GDP and whether the policies were successful or not.

The Federal Reserve has seen its share of ups and downs as far as the interest rates in the last 20 years. As crises hit interest rates would raise and the Reserve would then push to lower it as a means of stabilizing the economy with the hopes that enticing the American people with lower interest rates it will spur us to spend more. At the same time banks started having a harder time getting short term loans from one another because many were afraid since the downfall of a couple industry leaders such as Lehman Brothers and Washington Mutual, this pushed the Federal Reserve into expanding its own lending to financial institutions to ensure they would have the funding for day to day operations.

The Federal Reserves actions regarding the flow of money supply can have a major impact on the short run GDP because it can affect unemployment. When money is flushed back into the system in a manner that it makes possible for more business to take out loans it makes it more likely for those business to hire employees thus dropping the unemployment rate. According to (Labonte, 2008) this is only true in the short run, leaving the longer run to only show in inflation.

In conclusion I feel that on many levels the pure concept of these policies showed promise in becoming successful but laid flat and didn't encompass the entire solution which unfortunately only seemed to make matters worse. The apparent greed that is seen by many large financial and corporations higher executives made these effort for not, instead of following though with Federal Reserves plans to get the money back into the American peoples hands which would then make a large impact in the economies recovery they choose to hold on to the money for a select small few.

Bibliography

Financial Crisis and Response. (2012, June). Retrieved from Federal Reserve Education: http://www.federalreserveeducation.org/about-the-fed/history/2006andbeyond.cfm

Labonte, M. (2008, April 30). Monetary Policy and the Federal Reserve:. Retrieved from CRS Report for Congress: http://fpc.state.gov/documents/organization/105191.pdf