Money and Banking class 3

1
Money and Banking class 3

• Jim Mahar
• St. Bonaventure

2
Introduction

• The Federal Reserve System
• Money

3
Federal Reserve (the Fed)

• Central Bank of US
• regulates banking system
• determines monetary policy
• quasi independent

4
Fed and Monetary policy

• Fed tries to keep the economy growing at a
  sustainable rate
• Minimize business cycle fluctuations
• What is sustainable/healthy?
• Controversial

5
Governments role in fiscal policy

• Fiscal policy involves governmental taxing and
  spending decisions
• the ability to aid the economy is debatable

6
Governments role in fiscal policy-continued

• government has a vested interest in maintaining
  orderly economy
• the ability to aid the economy is debatable
• prior to 1930s, most viewed governments role as
  very limited (Laissez-Faire)

7
Depression

• The Great Depression of early 1930s changed
  governments role
• Very severe and long-lasting depression,
  unemployment 25 or higher!
• Worldwide
• partially governmentally caused by poor decisions
  on taxing etc

8
Reactions to the Depression

• many gave up on capitalism
• Others came to believe government must play a
  more active role
• John Maynard Keynes

9
Track Record
10
Governments Track record

• intervening and helping the economy often very
  different things
• Government has done relatively poor job of
  controlling economy. High inflation of 1970s and
  early 1980s
• Lately they may be getting the hang of it

11
Federal Reserve

• We will look at the Fed in much greater detail in
  Chapter 5
• Add a strong statement that summarizes how you
  feel or think about this topic
• Summarize key points you want your audience to
  remember

12
Next Steps

• Summarize any actions required of your audience
• Summarize any follow up action items required of
  you