Macro Module 4 Assignment 1
Assignment 1: Privatizing the U.S. Money Supply
Would it be possible to privatize the money supply in the United States completely? In doing so, what would be the primary obstacle to overcome in implementing such a policy?
Macroeconomics 4.1
9 August, 2014
Privatizing the U.S. Money Supply From, what I’ve learned over the past few days, I think it’d be virtually impossible to privatize the money supply in the United Sates but, this isn’t necessarily a bad thing. As we already know, Keynesian economics promotes the intermediation of the government when it comes to stabilizing our economy. The Fed is the central bank of the U.S. and can play a vital role when it comes to maintaining the health of our economy. The central bank has free-rein access when it comes to making adjustments in our economy to either promote or restrict the money supply. The Fed can either decide to engage in expansionary monetary policy, which increases the money supply and decreases the interest rate, or they can choose to enact restrictive monetary policy, which decreases the money supply and increases the interest rate. Whether the Fed chooses one or the other depends on the status of the economy as a whole. One of the biggest roles the Fed plays is conducting monetary policy through open-market operations. Also the Fed supervises and regulates financial institutions and is considered “Banker’s” bank. I feel that if we privatize the money supply in the economy, which I assume means cut of the Fed, it would be a big mistake. It would be like eliminating the role of a principal in our schools. If there were no principals, who would we report to? Every teacher would just section off into different groups and create their own rules. And when a major problem was created, there wouldn’t be enough structure in place to address the issue. The same would go for the economy. Though we may not like the principal we have, there at least needs to be one, or a healthy alternative. With the way our
Would it be possible to privatize the money supply in the United States completely? In doing so, what would be the primary obstacle to overcome in implementing such a policy?
Macroeconomics 4.1
9 August, 2014
Privatizing the U.S. Money Supply From, what I’ve learned over the past few days, I think it’d be virtually impossible to privatize the money supply in the United Sates but, this isn’t necessarily a bad thing. As we already know, Keynesian economics promotes the intermediation of the government when it comes to stabilizing our economy. The Fed is the central bank of the U.S. and can play a vital role when it comes to maintaining the health of our economy. The central bank has free-rein access when it comes to making adjustments in our economy to either promote or restrict the money supply. The Fed can either decide to engage in expansionary monetary policy, which increases the money supply and decreases the interest rate, or they can choose to enact restrictive monetary policy, which decreases the money supply and increases the interest rate. Whether the Fed chooses one or the other depends on the status of the economy as a whole. One of the biggest roles the Fed plays is conducting monetary policy through open-market operations. Also the Fed supervises and regulates financial institutions and is considered “Banker’s” bank. I feel that if we privatize the money supply in the economy, which I assume means cut of the Fed, it would be a big mistake. It would be like eliminating the role of a principal in our schools. If there were no principals, who would we report to? Every teacher would just section off into different groups and create their own rules. And when a major problem was created, there wouldn’t be enough structure in place to address the issue. The same would go for the economy. Though we may not like the principal we have, there at least needs to be one, or a healthy alternative. With the way our