The Fed: Motivating or Discouraging

James Szczepkowski

Does The Fed Motivate? or Discourage?

The central bank in the United States is called the Fed, or the Federal Reserves. This was established in 1913 during Woodrow Wilson's presidency.

The Fed has many powers, but some of these include:
-reducing the fund rate through market operations
-reducing the discount rate for the banks in the United States
-reducing the required reserve ratio for the banks in the United States

These powers can motivate or discourage a company and their production rates, and this article will tell you more about what the Fed does to do so.

How The Fed Motivates and Discourages Companies

The Fed can motivate and encourage companies through raising discount rates. The more that they raise the discount rates, the less money a business will have to spend on their supplies. This results in money going towards saving up for a bigger, more expensive purchase that could benefit the company. The purchase could also put more of a profit into the companies pocket if it does its task quicker.

The Fed can discourage companies through interest. Interest is when you loan money from the bank, and then the bank makes you owe them the original mount borrowed plus a percentage of that money. If not payed off, interest will build up and make the borrower struggle; trying to find every last penny to pay off the amount of money that was borrowed. If the money is never payed off, the bank can "re-PO" your belongings to somewhat pay off your debt (Re-PO stands for the repossessing of your goods.)

How Does The Federal Reserve Benefit You?

How the Federal Reserve benefits your company all depends on you. Do not make loans that you cannot pay off and take advantage of the sales, and do the math to see which deal is going to be better and more beneficial.