The Federal Reserve And The Financial Crisis
The Federal Reserve and the Financial Crisis
March 28th, 2015
Elizabeth Turra Brouwer
11-1175
Macroeconomics
The Federal Reserve and the financial crisis
The book "The Federal Reserve and the Financial Crisis” contains 4 lectures given by Ben Bernanke, chairman of the U.S. Federal Reserve at George Washington University in March 2012. In this book he explains the type of actions taken by the Fed during the worst financial crisis since the Great Depression, the crisis of 2008-2009. The main idea of this book is to explain that the Fed has learned from its past mistakes and the causes that led it to them.
The book is very good written and it explains his ideas clearly. After each lecture there is a question and answer section and the book is basically divided into two parts. The first two provide a background to the last two lectures who focus on how the Fed dealt with the crisis and the recovery.
The author starts by talking about the origins and evolution of central banks. He explains how the central bank is not a regular bank; it’s a government agency, and it stands at the center of a country's monetary financial system. There are exceptions where they have currency union, where a number of countries share a central bank, like the European Central Bank that share the euro as their common currency.
He explains that central banks have two main missions; the first is to try to achieve macroeconomic stability and to maintain financial stability. The tools the central bank uses to achieve these two objectives. On the economic stability side, the main tool is monetary policy. They can raise or lower short-term interest rates by buying and selling securities in the open market. The other tool for dealing with financial panics or financial crises is the provision of liquidity. In order to address financial stability concerns, one thing they do is make short term loans to financial institutions, these can help calm the market and its called "lender of last
March 28th, 2015
Elizabeth Turra Brouwer
11-1175
Macroeconomics
The Federal Reserve and the financial crisis
The book "The Federal Reserve and the Financial Crisis” contains 4 lectures given by Ben Bernanke, chairman of the U.S. Federal Reserve at George Washington University in March 2012. In this book he explains the type of actions taken by the Fed during the worst financial crisis since the Great Depression, the crisis of 2008-2009. The main idea of this book is to explain that the Fed has learned from its past mistakes and the causes that led it to them.
The book is very good written and it explains his ideas clearly. After each lecture there is a question and answer section and the book is basically divided into two parts. The first two provide a background to the last two lectures who focus on how the Fed dealt with the crisis and the recovery.
The author starts by talking about the origins and evolution of central banks. He explains how the central bank is not a regular bank; it’s a government agency, and it stands at the center of a country's monetary financial system. There are exceptions where they have currency union, where a number of countries share a central bank, like the European Central Bank that share the euro as their common currency.
He explains that central banks have two main missions; the first is to try to achieve macroeconomic stability and to maintain financial stability. The tools the central bank uses to achieve these two objectives. On the economic stability side, the main tool is monetary policy. They can raise or lower short-term interest rates by buying and selling securities in the open market. The other tool for dealing with financial panics or financial crises is the provision of liquidity. In order to address financial stability concerns, one thing they do is make short term loans to financial institutions, these can help calm the market and its called "lender of last