Claire Lasko
It isn’t any secret or surprise that the economy has a lot of impact on our daily lives. One of the biggest economic factors that impacts the way we live is the Federal Reserve. This should also be no surprise to you! But if it is a surprise to you, here’s a quick recap: In 1913 the Federal Reserve was created as a way to give the U.S. safety and security on nationwide money policies. It dictates economic and monetary policies by keeping in mind its two main goals: ensuring price stability and reaching maximum potential employment.
Thinking about the Federal Reserve and the economy isn’t something that I do on a daily basis, but maybe I should be giving it more thought. Recently, President Trump has been publicly commenting on how he believes that the Federal Reserve should be ‘cutting rates’ and ‘lifting the economy’. (What does that mean you might ask? President Trump would like to see the interest rates decrease as it would eventually result in an increase in consumer spending, which he believes will lift, or boost, the economy.) Does President Trump have any say or jurisdiction on how the Federal Reserve chooses to handle itself? Short answer: No. Did it stop him from voicing his opinion? Does anything?
You might be wondering, or just be relieved at this point, as to why the President of the United States cannot control how the government's central bank runs itself. The Federal Reserve’s decision-making board is made up of 220 PhD economist (Yes! You could get your PhD in economics!) plus various researchers and support staff. Notice how majority of the decision-making board members are highly educated in economics? As students, we struggle to make it through a basic level of economic understanding through various theoretical situations. Now imagine, someone gets to make these life-impacting decisions, you are not going to want them to mess up. So who better to ask than those who are most qualified? Not only is this logical, but it puts the U.S. citizens at peace knowing that the Federal Reserve is not just a political game. Theoretically, of course.
We do have to take in consideration the the Federal Reserve is a government aid. This means that it is fair game to becoming a political punching bag. We also know that life isn’t fair. Everything is inevitable, etc. Do you get the point? According Paul Krugman, an opinion columnist at The New York Times, “If [Trump] succeeds, one of our few remaining havens of serious, nonpartisan policy making will be on its way toward becoming as corrupt and dysfunctional as the rest of the Trump administration.”. His points are valid. The reason that the Federal Reserve has kept the economy on its feet is because it doesn’t allow for outsiders influence to determine the policies to be made.
Will this change in the future? Hopefully, as the years keep coming, the Federal Reserve will continue to make effective and educated policies with their two main goals in mind. But, as we know from scandals even as recent as the USC admissions scandal, the Federal Reserve could be subject to an exponentially increasing amount of biases in the coming years.
Works Cited:
When the Fed Raises or Lowers Interest Rates, www.foundationsforliving.org/articles/foundation/fedraiselower.html.
Business, CNN. “How the Federal Reserve Works.” YouTube, YouTube, 13 June 2017, www.youtube.com/watch?v=9t2ifgMscDA.
Krugman, Paul. “Why Does Trump Want to Debase the Fed?” The New York Times, The New York Times, 8 Apr. 2019, www.nytimes.com/2019/04/08/opinion/fed-herman-cain-stephen-moore.html.
Tankersley, Jim. “Trump Says Fed Should Cut Rates and Lift Economy.” The New York Times, The New York Times, 5 Apr. 2019, www.nytimes.com/2019/04/05/business/economy/trump-fed-interest-rates.html.
I really like how you used sarcasm in your writing as is made me more personally connect to the topic. Also, I think it is very interesting to say the least, how President Trump is using the policies we have been learning in macroeconomics to influence the economy. Although his ideas are not always the best for the good of the entire economy, I think it is great that he is at least taking initiative and trying to make a change.
ReplyDeleteI like how you talked about how the federal reserve actually works because before taking econ I didn't even know it existed. I think it's important that the fed stays out of politics because it has such an important role that if not used correctly could really mess things up. I also don't think we should be using the fed powers unless absolutely necessary, because the economy is self correcting and the economy is currently in a healthy state.
ReplyDeleteThis was interesting because I didn't even think about the effects of who was in control of the reserve. I know that the reserve is used to regulate the economy especially in recessions but it is interesting that this would be done separately from political policies that get put into place.
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