A Brief Analysis of the History of the Federal Reserve System

Thus there is culture created exactly where new members experience a kind of testing period to see how they will react to this kind of pressures.

The pressures on a Fed can also be broken down into two broad categories. You'll find the arguments made by individuals who desire to preserve the Federal Reserve=s independence intact and people who need to see far more governmental control, generally from either the Congress or the Presidency.

Those who argue for a greater control for your Fed=s independence cite history on their side. They see the Federal Reserve as an imperious monarch position which has no accountability, democratic input or reparation. The social costs with the Fed=s attitude of independence and particularly that of Allen Greenspan is also seen, argue those who wish to exert higher manage of the Fed, in terms of unemployment and output. This ailment has also contaminated central bankers worldwide. Central bankers are becoming ineffective in controlling the financial system, thus, the require for independent central banks.

Most from the other criticisms of Greenspan are much less consequential. Some "monetarist" economists quibble on the details of monetary policy.

By the mid-1970s, soaring oil prices fueled a rising client price index at double-digit rates in 1974 and once again in 1979-80 (Mishkin, 1997). The oil cost shocks, and the persistence of increasing rates of both unemployment and inflation resulted in what several economists called stagflation. President Ronald Reagan adopted a "supply-side" economic strategy that had 2 elements: there was created a high-deficit fiscal policy and there was a tight "monetarist" policy at the Federal Reserve.

Not only has the Fed's monetary restraint at times deliberately pushed the economy into deep recession, in the attendant loss of millions of jobs, but its impact on a structure of interest rates and dollar exchange rates powerfully alters the U.S. distribution of national funds and wealth (Norton et. al. 1996, 42). By keeping a close rein on a dollars provide and its attendant correlation of interest rates and inflation, the Federal Reserve's actions during the last many years have generated economic consequences that are generally regarded as by proponents of independence to become at least equal on the potential impact of major tax legislation that Congress as well as the White Home are still quarreling over. An independent central bank is an institutional idea that complements well the counterrevolution now underway in U.S. budget policy (Mishkin, 1997). Washington's fiscal policy appears to be committed to a deficit-cutting mode to your foreseeable future, although Congress appears in a position to avoid discretionary spending, regulatory intervention, or measures to enhance equity during the distribution of national money and wealth.

 

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