Currency To Have
By: Asia Anthony
Who has control over this particular issue?
Define how this power has been asserted
When the Federal Reserve System was established, its founders did not intend it to pursue an active monetary policy to stabilize the economy. The basic ideas of economic stabilization policy were foreign at the time, dating only from John Maynard Keynes' work in 1936. Instead, the founders viewed the Fed as a means of preventing the supplies of money and credit from drying up during economic contractions, as happened often in the pre-1914 period.
One of the principal ways in which the Fed was to provide such insurance against financial panics was to act as the "lender of last resort". That is, when risky business prospects made commercial banks hesitant to extend new loans, the Fed would step in by lending money to the banks, thus inducing banks to lend more money to their customers.
Federal Reserve Logo
Federal Reserve Political Cartoon
- The tax policy for the Democratic Party calls for raising certain taxes to provide money for government spending, which in turn generates business. The party platform asserts that government spending provides "good jobs and will help the economy today."
- "We believe government should tax only to raise money for its essential functions," the Republicans state their case plainly on the Republican National Convention web site. That is, Republicans believe government should spend money only to enforce contracts, maintain basic infrastructure and national security, and protect citizens against criminals.
Federal Reserve Disadvantages
2– The Federal Reserve devalues our currency. Since the Federal Reserve was created in 1913, the U.S. dollar has lost 96 percent of its purchasing power. The truth is that just a two percent inflation rate will wipe out half of your purchasing power within a single generation.
3– The Federal Reserve manipulates the U.S. economy by setting national interest rates. By keeping rates high or low, the Federal Reserve has the power to create economic growth or to destroy it. They have the power to inflate massive bubbles and to pop them.
Conclusion
Today, the Fed uses its tools to control the supply of money to help stabilize the economy. When the economy is slumping, the Fed increases the supply of money to spur growth. Conversely, when inflation is threatening, the Fed reduces the risk by shrinking the supply. While the Fed's mission of "lender of last resort" is still important, the Fed's role in managing the economy has expanded since its origin.