Economics For Business: Article Analysis Paper
HIS term from 1987 to 2006 is truly unprecedented. He had his finger on the pulse of the economy from the beginnings of the dot. Com boom Into the post 9-11 world. He maintained most of his control of the economy implementing his practice of “inflation targeting”. Inflation targeting Is a monetary policy tool In which Greenshank would attempt to control the rate of inflation. The Federal Reserve would release to the public a predicted rate of inflation which would be best to grow the economy at a steady rate.
If the rate of inflation was growing too quickly, the Federal Reserve would raise the short-term Interest rates. This raise In short-term Interest rates would control the money supply or Aggregate Supply of Funding. This would conceivably slow the economy and the rate of inflation. This tactic would be reversed If the economy was growing to slowly or was In recession. The Federal Reserve would then lower short-term rates thus Increasing the availability of money.
There are complex formulas which seem to solidify these monetary policies but not everyone agrees that they are effective. From my own experiences I remember being unemployed during the collapse of the dot. Com bubble. I remember
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My wife and both worked in IT at the time, and were both laid off at the same time. With my wife pregnant, and us both being out of work our only option was to choose another career path. We were able switch professions quickly and enter Real Estate, which was profitable at the time of the Information Technology down turn. This was a good short term solution which solved our temporary financial problems. I (after a couple of years) returned to my higher paying IT profession and am now able to have my wife stay home with the kids.
During this difficult time however, my family was praying that the economy would improve, and there was never a doubt that if there was a way out of the 1 OFF Now the federal reserve is being led by Ben Shalom Brenan. Brenan was previously Chairman of the U. S. President’s Council of Economic Advisers, and member of the Board of Governors of the Federal Reserve, serving from August 2002 until Just prior to his June 2005 swearing-in as CAE chairman. One of the philosophical differences between Greenshank and Brenan is that Brake believes that a minimal level of inflation is preferred.
Now that he is at the helm of the Federal Reserve, and the growth of the economy is a lot more concerning people are questioning the decisions being made by the new chairman. He is being criticized a great deal more than Greenshank ever was. Recently Brenan made the decision to again raise the term interest rates in an attempt to slow down inflation which he thought was rising to quickly. This interest rate increase probably had the effect he wanted, but it also caused a significant drop in publicly traded stocks.
The drops have happened each time Brenan has raised rates, to the point where the stock market is at a loss for the year. (Fox News) The stock market is extremely temperamental, and it is highly affected by psychology. If investors do not have faith that the economy is healthy they are less likely to invest in the stock market, and more likely to invest in more stable lower yielding investment strategies such as bonds, or gold. In fact this year the price of gold has hot through the roof and bonds have been tremendously successful as well(Fortune).