Federal Reserve Essay

Essay by nathanmaxwellCollege, UndergraduateA, April 2014

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Nathan Maxwell



Federal Reserve Rationale

Based on the film the best rationale for the existence of the Federal Reserve is stability. The Fed is able to, sometimes, divert recessions in the economy from becoming catastrophic depressions. They can do this by changing inflation, interest rates, etc. The Fed has proven, such as in the early 90's, that they can halt recessions and even turn them into eras of economic prosperity. When the Fed was first established in 1913 it was due to the US economy having too many financial panics. The key objectives set by congress are to maintain maximum employment, stable prices, and moderate long-term interest rates. Seeing as the economy will always have down times the best rationale for keeping the Fed is because it provides stability and keeps us from falling into depression.

The best rationale for getting rid of the Fed is that a market is usually right and will fix itself.

This idea is to just let the market 'be' and everything will work itself out naturally, without outside intervention. This is a more conservative idea and has its good points. With all prices and interest rates being set by the market there would be no arguing over whether or not the said prices/interest rates are correct. The only issue comes when there is an economic recession whether or not it will escalate without someone being able to monitor the situation. In other words, we would be at the mercy of the market, good or bad, without the Federal Reserve.