The Federal Reserve
Published on Nov 21, 2015
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PRESENTATION OUTLINE
Agenda:
*A brief history
*What is the discount rate?
*What factors influence the discount rate?
*How does the discount rate affect banks and their rates?
*How does monetary policy control the money supply?
*How does a stimulus program help the economy?
*How does the United States Federal Reserve create money?
*Currently, what indicators are evident that there is too much or too little money within the economy and how is monetary policy aiming to adjust this?
Photo by Jason A. Samfield
The Fed: a brief overview
- After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
https://www.federalreserveeducation.org/about-the-fed/history
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
Photo by theqspeaks
The Fed: a brief overview
- In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
https://www.federalreserveeducation.org/about-the-fed/history
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
Photo by theqspeaks
The Fed: a brief overview
- During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
https://www.federalreserveeducation.org/about-the-fed/history
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
Photo by theqspeaks
The Fed: a brief overview
- The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
https://www.federalreserveeducation.org/about-the-fed/history
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
After the panic of 1907 and growing a concern and desire for banking reform, "The Aldrich-Vreeland Act of 1908, passed as an immediate response to the panic of 1907, provided for emergency currency issue during crises. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems."
In December 23, 1913 "President Woodrow Wilson signed the Federal Reserve Act into law... a decentralized central bank that balanced the competing interests of private banks and populist sentiment."
During the WWI, the Fed's "greater impact in the United States came from the Reserve Banks’ ability to discount bankers acceptances. Through this mechanism, the United States aided the flow of trade goods to Europe, indirectly helping to finance the war"
The Fed would continue to undergo more changes including: the end of reliance on gold to control credit, the beginning of open market operations, increased relations with foreign central banks, passing of the Glass-Steagall Act and FDIC as a response to the Great Depression, all the way up to the 2006 recession into our current modernized and globalized financial stage.
Photo by theqspeaks
INVESTOPEDIA EXPLAINS 'FEDERALDISCOUNT RATE'
"A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy. Conversely, a raised discount rate will make it more expensive for the banks to borrow, and would thereby decrease the money supply. Funds borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days."
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How does it work?
"The Fed uses the discount rate to control the supply of available funds, which in turn influences inflation and overall interest rates. The more money available, the more likely inflation will occur. Raising the rate makes it more expensive to borrow from the Fed. That lowers the supply of available money, which increases the short-term interest rates. Lowering the rate has the opposite effect, bringing short-term interest rates down."
The Fed uses the discount rate to control the supply of available funds, which in turn influences inflation and overall interest rates. The more money available, the more likely inflation will occur. Raising the rate makes it more expensive to borrow from the Fed. That lowers the supply of available money, which increases the short-term interest rates. Lowering the rate has the opposite effect, bringing short-term interest rates down.
Read more: http://www.bankrate.com/rates/interest-rates/federal-discount-rate.aspx#ixz...
Follow us: @Bankrate on Twitter | Bankrate on Facebook
Read more: http://www.bankrate.com/rates/interest-rates/federal-discount-rate.aspx#ixz...
Follow us: @Bankrate on Twitter | Bankrate on Facebook
Photo by CarbonNYC [in SF!]
How does monetary policy control the money supply?
Photo by bmward_2000
How does a stimulus program help the economy?
Photo by gruntzooki
How does a stimulus program help the economy?
Photo by aresauburn™
Currently, what indicators are evident that there is too much or too little money within the economy and how is monetary policy aiming to adjust this?
Untitled Slide
Photo by PeterJBellis
