Control of the Supply of Money

Thus, over the years, the brass has been progressively charged with (1) the fear of economic stability in the country, (2) the maintenance of high levels of employment, (3) the maintenance of stability in the purchasing force out of the dollar, and (4) the maintenance of a reasonable balance of payments with respect to foreign transactions ( tabular array of Governors, national substitute organisation, 1985). The legislation established by Congress for the Federal appropriate System, in effect, establishes the System's basic fiscal policy objectives (Anderson, 1985). Within the context of these objectives, the venire of Governors establishes specific immenseterm and shortterm goals, which are designed to consider attainment of the basic objectives.

In the earlyyears of the Federal check System, the basic policy objective was the preservation of the determine of the dollar through the protection of the gold standard (Anderson, 1985). This mandate was gradually expanded to include the maintenance of reasonable involvement rate levels, safeguarding the quality of denotation, and the prevention of an excessive use of credit for nonproductive purposesespecially speculation.

The country's experience with the severe and prolonged ceding back of the 1930s brought about major changes in the mandate for the System. By the end of the Second World War, the objectives for the System were (

Black, R. P. (1984). The Fed's mandate: Help or hindrance? economic Review, 70(4), 37.

Anderson, C. J. (1985). Monetary policydecisionmaking, tools, and objectives. Philadelphia: Federal Reserve Bank of Philadelphia.

Kidwell, D. S., & Peterson, R. L. (1990). Financial institutions, markets, and money. (3rd ed.). Hinsdale, Illinois: The Dryden Press. Wallich, H. C., & Brady, T. F. (1988). Federal Reserve System. New York: McGraw cumulus Book Company.

To resolve the issue of who was to control the Federal Reserve upon its creation, the institution was granted a quasi independent status. First, the System is not a single bank.

There are 12 regional Federal Reserve Banks, in addition to the Board of Governors and their subordinate operating boards in Washington. The capital of the System is owned by the private banks which are members of the system.

That the Federal Reserve System should control the supply of money is not open to heading, so long as the System's mandate remains unchanged. A question can be raised, however, as to whether the various aspects of the System's mandate should be retained. The promotion of economic stability and growth, however, are unlikely to be removed from the System's mandate, and as long as these objectives are a part of its mandate, it must control the supply of money.

In practice, the Board of Governors accommodates the System to the sometimes conflicting and always demanding requirements of the mandate by shifting the wildness of policy implementation according to the closely pressing problems being confronted in the economy. This approach often leads to an emphasis on shortterm solutions to longterm problems.

Friedman, M. (1962). Should in that respect be an independent monetary authority? In Yeager, L. B. (Ed.). In search of a monetary constitution. Cambridge, Massachusetts: Harvard University Press, pp. 173194.

Second, the Federal Reserve System was granted an independence of action, in that t
Ordercustompaper.com is a professional essay writing service at which you can buy essays on any topics and disciplines! All custom essays are written by professional writers!