Monetary policy of the United States - Wikipedia

Current state of US monetary policy MonetarypolicyoftheUnitedStates FromWikipedia,thefreeencyclopedia Jumptonavigation Jumptosearch ThisarticleispartofaseriesonBankingintheUnitedStates Regulation Monetarypolicy Bankingcharters Creditunion Federalsavingsbank Federalsavingsassociation Nationalbank Statebank Lending Creditcard Depositaccounts Checking Money-market Savings Certificateofdeposit Accountinsurance FederalDepositInsuranceCorporation(FDIC) NationalCreditUnionShareInsuranceFund(NCUA) Paymentandtransfer Check clearing Check21Act Electronicfundstransfer(EFT) ATMcard Debitcard Wiretransfer Substitutecheck ACHNetwork Billpayment  UnitedStatesportalvte (Percentchangefromayearearlier)  M2moneysupply  CPI  CoreCPI   YearlyM2moneysupplyincreases  MonthlyM2moneysupplyincreases  MonthlyM2moneysupplydecreases MonetarypolicyofTheUnitedStatesconcernsthosepoliciesrelatedtotheminting&printingofmoney,policiesgoverningthelegalexchangeofcurrency,demanddeposits,themoneysupply,etc.IntheUnitedStates,thecentralbank,TheFederalReserveSystem,colloquiallyknownas"TheFed"isthemonetaryauthority. ItissignificanttopointoutthattheUnitedStatesusesafiatcurrencyasof1933,whereasfrom1873-1933apreciousmetalstandardorgoldstandardwasinuse. TheFederalReserve'sboardofgovernors,alongwiththeOpenMarketCommitteearetheprinciplearbitersofmonetarypolicyintheUnitedStates,thoughtheU.S.isuniqueinthatthemonetarypolicyroleisultimatelysharedalongwiththeUnitedStatesTreasury(USTreasurySecurities).TheTreasuryisthepenultimateagencyonfiscalpolicy,thoughitisdirectlyinvolvedinmonetarypolicythroughprinting&mintingfederalreservenotesandtreasurys. TheFedislargelyconcernedwithpoliciesrelatedtotheissuanceofloans(includingreserverateandinterestrates),alongwithotherpoliciesthatdeterminethesizeandrateofgrowthofthemoneysupply(suchasbuyingandsellinggovernmentbonds),whereastheTreasurydealsdirectlywithmintingandprintingaswellasbudgetingthegovernment.TheU.S.CongressestablishedthreekeyobjectivesformonetarypolicyintheFederalReserveAct:maximizingemployment,stabilizingprices,andmoderatinglong-terminterestrates. Contents 1Overview 2Moneysupply 3CurrentstateofUSmonetarypolicy 4StructureofmodernUSinstitutions 4.1FederalReserve 4.2U.S.Treasury 4.3Privatecommercialbanks 5Moneycreation 6Significanteffects 7Uncertainties 8OpinionsoftheFederalReserve 8.1Achievements 8.2Criticisms 8.2.1Auditing 8.2.2Fulfillmentofwidereconomicgoals 8.2.3CausesofTheGreatDepression 8.2.4Publicconfusion 8.2.5Criticismofgovernmentinterference 8.2.6Reserverequirement 8.2.7Criticismofprivatesectorinvolvement 9Seealso 10References 11Externallinks Overview[edit] Seealso:FederalReserveSystem,Monetarypolicy,andmoneysupply TheHeadquartersoftheFederalReserveSysteminWashington,D.C. TheFederalReserveActcreatedtheFederalReserveSystemin1913asthecentralbankoftheUnitedStates.Itsprimarytaskis toconductthenation’smonetarypolicytopromotemaximumemployment,stableprices,andmoderatelong-terminterestratesintheU.S.economy.Itisalsotaskedtopromotethestabilityofthefinancialsystemandregulatefinancialinstitutions,andtoactaslenderoflastresort. [1] [2] ThemonetarypolicyoftheUnitedStatesisconductedbytheFederalOpenMarketCommittee,whichiscomposedoftheFederalReserveBoardofGovernorsand5outofthe12FederalReserveBankpresidents,andisimplementedbyalltwelveregionalFederalReserveBanks. Monetarypolicyreferstoactionsmadebycentralbankswhichdeterminethesizeandgrowthrateofthemoneysupplyavailableintheeconomy,andwhichwouldresultindesiredobjectiveslikelowinflation,lowunemploymentandstablefinancialsystems.Theeconomy'saggregatemoneysupplyisthetotalof M0money,orMonetaryBase-"dollars"incurrencyandbankmoneybalancescreditedtothecentralbank'sdepositors,whicharebackedbythecentralbank'sassets, plusM1,M2,M3money-"dollars"intheformofbankmoneybalancescreditedtobanks'depositors,whicharebackedbythebank'sassetsandinvestments. TheFOMCinfluencesthelevelofmoneyavailabletotheeconomybythefollowingmeans: Reserverequirements-specifiesarequiredminimumpercentageofdepositsinacommercialbankthatshouldbeheldasreserve(i.e.asdepositswiththeFederalReserve),withtherestavailabletoloanorinvest.Higherrequirementsmeanlessmoneyloanedorinvested,helpingkeepinflationincheck.Raisingthefederalfundsrateearnedonthosereservesalsohelpsachievethisobjective. Openmarketoperations-theFederalReservebuysorsellsUSTreasurybondsandothersecuritiesheldbybanksinexchangeforreserves;morereservesincreaseabank'scapacitytoloanorinvestelsewhere. Discountwindowlending-bankscanborrowfromtheFederalReserve. Monetarypolicydirectlyaffectsinterestrates;itindirectlyaffectsstockprices,wealth,andcurrencyexchangerates.Throughthesechannels,monetarypolicyinfluencesspending,investment,production,employment,andinflationintheUnitedStates.Effectivemonetarypolicycomplementsfiscalpolicytosupporteconomicgrowth. TheFederalReserve'smonetarypolicyobjectivestokeeppricesstableandunemploymentlowisoftencalledthedualmandate.Thisreplacespastpracticesunderagoldstandardwherethemainconcernisthegoldequivalentofthelocalcurrency,orunderagoldexchangestandardwheretheconcernisfixingtheexchangerateversusanothergold-convertiblecurrency(previouslypracticedworldwideundertheBrettonWoodsAgreementof1944viafixedexchangeratestotheU.S.dollar). Moneysupply[edit] Mainarticles:MoneysupplyandFractional-reservebanking Themoneysupplyhasdifferentcomponents,generallybrokendowninto"narrow"and"broad"money,reflectingthedifferentdegreesofliquidity('spendability')ofeachdifferenttype,asbroaderformsofmoneycanbeconvertedintonarrowformsofmoney(ormaybereadilyacceptedasmoneybyothers,suchaspersonalchecks).[3] Forexample,demanddepositsaretechnicallypromisestopayondemand,whilesavingsdepositsarepromisestopaysubjecttosomewithdrawalrestrictions,andCertificatesofDepositarepromisestopayonlyatcertainspecifieddates;eachcanbeconvertedintomoney,but"narrow"formsofmoneycanbeconvertedmorereadily.TheFederalReservedirectlycontrolsonlythemostnarrowformofmoney,physicalcashoutstandingalongwiththereservesofbanksthroughoutthecountry(knownasM0orthemonetarybase);theFederalReserveindirectlyinfluencesthesupplyofothertypesofmoney.[3] Broadmoneyincludesmoneyheldindepositbalancesinbanksandotherformscreatedinthefinancialsystem.Basiceconomicsalsoteachesthatthemoneysupplyshrinkswhenloansarerepaid;[4][5]however,themoneysupplywillnotnecessarilydecreasedependingonthecreationofnewloansandothereffects.Otherthanloans,investmentactivitiesofcommercialbanksandtheFederalReservealsoincreaseanddecreasethemoneysupply.[6]Discussionof"money"oftenconfusesthedifferentmeasuresandmayleadtomisguidedcommentaryonmonetarypolicyandmisunderstandingsofpolicydiscussions.[7] CurrentstateofUSmonetarypolicy[edit] Seealso:HistoryofmonetarypolicyintheUnitedStates InAugust2020,afterundershootingits2%inflationtargetforyears,theFedannounceditwouldbeallowinginflationtotemporarilyrisehigher,inordertotargetanaverageof2%overthelongerterm.[8][9]Itisstillunclearifthischangewillmakemuchpracticaldifferenceinmonetarypolicyanytimesoon.[10] StructureofmodernUSinstitutions[edit] FederalReserve[edit] Mainarticle:FederalReserveSystem§ Monetarypolicy MonetarypolicyintheUSisdeterminedandimplementedbytheUSFederalReserveSystem,commonlyreferredtoastheFederalReserve.Establishedin1913bytheFederalReserveActtoprovidecentralbankingfunctions,[11]theFederalReserveSystemisaquasi-publicinstitution.Ostensibly,theFederalReserveBanksare12privatebankingcorporations;[12][13][14]theyareindependentintheirday-to-dayoperations,butlegislativelyaccountabletoCongressthroughtheauspicesofFederalReserveBoardofGovernors. TheBoardofGovernorsisanindependentgovernmentalagencyconsistingofsevenofficialsandtheirsupportstaffofover1800employeesheadquarteredinWashington,D.C.[15]ItisindependentinthesensethattheBoardcurrentlyoperateswithoutofficialobligationtoaccepttherequestsoradviceofanyelectedofficialwithregardtoactionsonthemoneysupply,[16]anditsmethodsoffundingalsopreserveindependence.TheGovernorsarenominatedbythePresidentoftheUnitedStates,andnominationsmustbeconfirmedbytheU.S.Senate.[17]Thereisverystrongeconomicconsensusthatindependencefrompoliticalinfluenceisgoodformonetarypolicy.[18] ThepresidentsoftheFederalReserveBanksarenominatedbyeachbank'srespectiveBoardofDirectors,butmustalsobeapprovedbytheBoardofGovernorsoftheFederalReserve.TheChairmanoftheFederalReserveBoardisgenerallyconsideredtohavethemostimportantposition,followedbythepresidentoftheFederalReserveBankofNewYork.[17]TheFederalReserveSystemisprimarilyfundedbyinterestcollectedontheirportfolioofsecuritiesfromtheUSTreasury,andtheFedhasbroaddiscretionindraftingitsownbudget,[19]but,historically,nearlyalltheinteresttheFederalReservecollectsisrebatedtothegovernmenteachyear.[20] TheFederalReservehasfourmainmechanismsformanipulatingthemoneysupply.Itcanbuyorselltreasurysecurities.Sellingsecuritieshastheeffectofreducingthemonetarybase(becauseitacceptsmoneyinreturnforpurchaseofsecurities),takingthatmoneyoutofcirculation.Purchasingtreasurysecuritiesincreasesthemonetarybase(becauseitpaysouthardcurrencyinexchangeforacceptingsecurities).Secondly,thediscountratecanbechanged.Third,theFederalReservecanadjustthereserverequirement,whichcanaffectthemoneymultiplier;thereserverequirementisadjustedonlyinfrequently,andwaslastadjustedinMarch2020,atwhichtimeitwassettozero.[21]Atareserverequirementofzero,themoneymultiplierisundefined,becausecalculatingitwouldinvolvedivisionbyzero.InOctober2008theFederalReserveaddedafourthmechanismbybeginningtopayinterestonreserves,whichoneyearlatertheFedChairmandescribedasthe"mostimportanttool"theFedcouldusetoraiseinterestrates.[22][23] Inpractice,theFederalReserveusesopenmarketoperationstoinfluenceshort-terminterestrates,whichistheprimarytoolofmonetarypolicy.Thefederalfundsrate,forwhichtheFederalOpenMarketCommitteeannouncesatargetonaregularbasis,reflectsoneofthekeyratesforinterbanklending.Openmarketoperationschangethesupplyofreservebalances,andthefederalfundsrateissensitivetotheseoperations.[24] Intheory,theFederalReservehasunlimitedcapacitytoinfluencethisrate,andalthoughthefederalfundsrateissetbybanksborrowingandlendingfundstoeachother,thefederalfundsrategenerallystayswithinalimitedrangeaboveandbelowthetarget(asparticipantsareawareoftheFed'spowertoinfluencethisrate). Assumingaclosedeconomy,whereforeigncapitalortradedoesnotaffectthemoneysupply,whenmoneysupplyincreases,interestratesgodown.Businessesandconsumershavealowercostofcapitalandcanincreasespendingandcapitalimprovementprojects.Thisencouragesshort-termgrowth.Conversely,whenthemoneysupplyfalls,interestratesgoup,increasingthecostofcapitalandleadingtomoreconservativespendingandinvestment.TheFederalreserveincreasesinterestratestocombatInflation. U.S.Treasury[edit]   30yearmortgageaverage  30YearTreasuryBond  10YearTreasuryBond  2YearTreasuryBond  3monthTreasuryBond  EffectiveFederalFundsRate Recessions Mainarticle:UnitedStatesTreasurysecurity AUnitedStatesTreasurysecurityisanIOUfromtheUSGovernment.ItisagovernmentdebtinstrumentissuedbytheUnitedStatesDepartmentoftheTreasurytofinancegovernmentspendingasanalternativetotaxation.Treasurysecuritiesareoftenreferredtosimplyas"Treasuries".Since2012themanagementofgovernmentdebthasbeenarrangedbytheBureauoftheFiscalService,succeedingtheBureauofthePublicDebt. Privatecommercialbanks[edit] Mainarticle:Fractional-reservebanking Whenmoneyisdepositedinabank,itcanthenbelentouttoanotherperson.Iftheinitialdepositwas$100andthebanklendsout$100toanothercustomerthemoneysupplyhasincreasedby$100.However,becausethedepositorcanaskforthemoneyback,bankshavetomaintainminimumreservestoservicecustomerneeds.Ifthereserverequirementis10%then,intheearlierexample,thebankcanlend$90andthusthemoneysupplyincreasesbyonly$90.Thereserverequirementthereforeactsasalimitonthismultipliereffect.Becausethereserverequirementonlyappliestothemorenarrowformsofmoneycreation(correspondingtoM1),butdoesnotapplytocertaintypesofdeposits(suchastimedeposits),reserverequirementsplayalimitedroleinmonetarypolicy.[25] Moneycreation[edit] Mainarticle:Moneycreation AsonNov2021theUSgovernmentmaintainsoverUS$2214.3billionincashmoney(primarilyFederalReserveNotes)incirculationthroughouttheworld,[26]upfromasumoflessthan$30billionin1959.Belowisanoutlineoftheprocesswhichiscurrentlyusedtocontroltheamountofmoneyintheeconomy.Theamountofmoneyincirculationgenerallyincreasestoaccommodatemoneydemandedbythegrowthofthecountry'sproduction.Theprocessofmoneycreationusuallygoesasfollows: Banksgothroughtheirdailytransactions.Ofthetotalmoneydepositedatbanks,significantandpredictableproportionsoftenremaindeposited,andmaybereferredtoas"coredeposits."Banksusethebulkof"non-moving"money(theirstableor"core"depositbase)byloaningitout.[27]Bankshavealegalobligationtokeepacertainfractionofbankdepositmoneyon-handatalltimes.[28] Inordertoraiseadditionalmoneytocoverexcessspending,CongressincreasesthesizeoftheNationalDebtbyissuingsecuritiestypicallyintheformofaTreasuryBond[29](seeUnitedStatesTreasurysecurity).ItofferstheTreasurysecurityforsale,andsomeonepayscashtothegovernmentinexchange.Banksareoftenthepurchasersofthesesecurities,andthesesecuritiescurrentlyplayacrucialroleintheprocess. The12-personFederalOpenMarketCommittee,whichconsistsoftheheadsoftheFederalReserveSystem(thesevenFederalgovernorsandfivebankpresidents),meetseighttimesayeartodeterminehowtheywouldliketoinfluencetheeconomy.[30]Theycreateaplancalledthecountry's"monetarypolicy"whichsetstargetsforthingssuchasinterestrates.[31] Everybusinessday,theFederalReserveSystemengagesinOpenmarketoperations.[32]IftheFederalReservewantstoincreasethemoneysupply,itwillbuysecurities(suchasU.S.TreasuryBonds)anonymouslyfrombanksinexchangefordollars.IftheFederalReservewantstodecreasethemoneysupply,itwillsellsecuritiestothebanksinexchangefordollars,takingthosedollarsoutofcirculation.[33][34]WhentheFederalReservemakesapurchase,itcreditstheseller'sreserveaccount(withtheFederalReserve).Themoneythatitdepositsintotheseller'saccountisnottransferredfromanyexistingfunds,thereforeitisatthispointthattheFederalReservehascreatedHigh-poweredmoney. Bymeansofopenmarketoperations,theFederalReserveaffectsthefreereservesofcommercialbanksinthecountry.[35]AnnaSchwartzexplainsthat"iftheFederalReserveincreasesreserves,asinglebankcanmakeloansuptotheamountofitsexcessreserves,creatinganequalamountofdeposits".[33][34][36] Sincebankshavemorefreereserves,theymayloanoutthemoney,becauseholdingthemoneywouldamounttoacceptingthecostofforegoneinterest[35][37]Whenaloanisgranted,apersonisgenerallygrantedthemoneybyaddingtothebalanceontheirbankaccount.[38] ThisishowtheFederalReserve'shigh-poweredmoneyismultipliedintoalargeramountofbroadmoney,throughbankloans;aswritteninaparticularcasestudy,"asbanksincreaseordecreaseloans,thenation's(broad)moneysupplyincreasesordecreases."[5]Oncegrantedtheseadditionalfunds,therecipienthastheoptiontowithdrawphysicalcurrency(dollarbillsandcoins)fromthebank,whichwillreducetheamountofmoneyavailableforfurtheron-lending(andmoneycreation)inthebankingsystem.[39] Inmanycases,account-holderswillrequestcashwithdrawals,sobanksmustkeepasupplyofcashhandy.Whentheybelievetheyneedmorecashthantheyhaveonhand,bankscanmakerequestsforcashwiththeFederalReserve.Inturn,theFederalReserveexaminestheserequestsandplacesanorderforprintedmoneywiththeUSTreasuryDepartment.[40]TheTreasuryDepartmentsendstheserequeststotheBureauofEngravingandPrinting(tomakedollarbills)andtheBureauoftheMint(tostampthecoins). TheU.S.TreasurysellsthisnewlyprintedmoneytotheFederalReserveforthecostofprinting.[41]Thisisabout6centsperbillforanydenomination.[42]Asidefromprintingcosts,theFederalReservemustpledgecollateral(typicallygovernmentsecuritiessuchasTreasurybonds)toputnewmoney,whichdoesnotreplaceoldnotes,intocirculation.[43]Thisprintedcashcanthenbedistributedtobanks,asneeded. ThoughtheFederalReserveauthorizesanddistributesthecurrencyprintedbytheTreasury(theprimarycomponentofthenarrowmonetarybase),thebroadmoneysupplyisprimarilycreatedbycommercialbanksthroughthemoneymultipliermechanism.[36][38][44][45]Onetextbooksummarizestheprocessasfollows: "TheFed"controlsthemoneysupplyintheUnitedStatesbycontrollingtheamountofloansmadebycommercialbanks.Newloansareusuallyintheformofincreasedcheckingaccountbalances,andsincecheckabledepositsarepartofthemoneysupply,themoneysupplyincreaseswhennewloansaremade...[46] Thistypeofmoneyisconvertibleintocashwhendepositorsrequestcashwithdrawals,whichwillrequirebankstolimitorreducetheirlending.[47][39]Thevastmajorityofthebroadmoneysupplythroughouttheworldrepresentscurrentoutstandingloansofbankstovariousdebtors.[46][48][49]AverysmallamountofU.S.currencystillexistsas"UnitedStatesNotes",whichhavenomeaningfuleconomicdifferencefromFederalReservenotesintheirusage,althoughtheydepartedsignificantlyintheirmethodofissuanceintocirculation.ThecurrencydistributedbytheFederalReservehasbeengiventheofficialdesignationof"FederalReserveNotes."[50] Significanteffects[edit] Mainarticle:Monetarypolicy In2005,theFederalReserveheldapproximately9%ofthenationaldebt[51]asassetsagainsttheliabilityofprintedmoney.Inpreviousperiods,theFederalReservehasusedotherdebtinstruments,suchasdebtsecuritiesissuedbyprivatecorporations.DuringperiodswhenthenationaldebtoftheUnitedStateshasdeclinedsignificantly(suchashappenedinfiscalyears1999and2000),monetarypolicyandfinancialmarketsexpertshavestudiedthepracticalimplicationsofhaving"toolittle"governmentdebt:boththeFederalReserveandfinancialmarketsusethepriceinformation,yieldcurveandtheso-calledriskfreerateextensively.[52] ExpertsarehopefulthatotherassetscouldtaketheplaceofNationalDebtasthebaseassettobackFederalReservenotes,andAlanGreenspan,longtheheadoftheFederalReserve,hasbeenquotedassaying,"IamconfidentthatU.S.financialmarkets,whicharethemostinnovativeandefficientintheworld,canreadilyadapttoapaydownofTreasurydebtbycreatingprivatealternativeswithmanyoftheattributesthatmarketparticipantsvalueinTreasurysecurities."[53]Inprinciple,thegovernmentcouldstillissuedebtsecuritiesinsignificantquantitieswhilehavingnonetdebt,andsignificantquantitiesofgovernmentdebtsecuritiesarealsoheldbyothergovernmentagencies. AlthoughtheU.S.governmentreceivesincomeoverallfromseigniorage,therearecostsassociatedwithmaintainingthemoneysupply.[49][54]Leadingecologicaleconomistandsteady-statetheoristHermanDaly,claimsthat"over95%ofour[broad]moneysupply[intheUnitedStates]iscreatedbytheprivatebankingsystem(demanddeposits)andbearsinterestasaconditionofitsexistence,"[49]aconclusiondrawnfromtheFederalReserve'sultimatedependenceonincreasedactivityinfractionalreservelendingwhenitexercisesopenmarketoperations.[55]EconomistEricMillercriticizesDaly'slogicbecausemoneyiscreatedinthebankingsysteminresponsetodemandforthemoney,[56]whichjustifiescost.[citationneeded] Thus,useofexpansionaryopenmarketoperationstypicallygeneratesmoredebtintheprivatesectorofsociety(intheformofadditionalbankdeposits).[57]Theprivatebankingsystemchargesinteresttoborrowersasacosttoborrowthemoney.[5][38][58]Theinterestcostsarebornebythosethathaveborrowed,[5][38]andwithoutthisborrowing,openmarketoperationswouldbeunsuccessfulinmaintainingthebroadmoneysupply,[37]thoughalternativeimplementationsofmonetarypolicycouldbeused.Depositorsoffundsinthebankingsystemarepaidinterestontheirsavings(orprovidedotherservices,suchascheckingaccountprivilegesorphysicalsecurityfortheir"cash"),ascompensationfor"lending"theirfundstothebank. Increases(orcontractions)ofthemoneysupplycorrespondstogrowth(orcontraction)ininterest-bearingdebtinthecountry.[5][37][49]Theconceptsinvolvedinmonetarypolicymaybewidelymisunderstoodinthegeneralpublic,asevidencedbythevolumeofliteratureontopicssuchas"FederalReserveconspiracy"and"FederalReservefraud."[59] Uncertainties[edit] Afewoftheuncertaintiesinvolvedinmonetarypolicydecisionmakingaredescribedbythefederalreserve:[60] Whilethesepolicychoicesseemreasonablystraightforward,monetarypolicymakersroutinelyfacecertainnotableuncertainties.First,theactualpositionoftheeconomyandgrowthinaggregatedemandatanytimeareonlypartiallyknown,askeyinformationonspending,production,andpricesbecomesavailableonlywithalag.Therefore,policymakersmustrelyonestimatesoftheseeconomicvariableswhenassessingtheappropriatecourseofpolicy,awarethattheycouldactonthebasisofmisleadinginformation.Second,exactlyhowagivenadjustmentinthefederalfundsratewillaffectgrowthinaggregatedemand—intermsofboththeoverallmagnitudeandthetimingofitsimpact—isnevercertain.Economicmodelscanproviderulesofthumbforhowtheeconomywillrespond,buttheserulesofthumbaresubjecttostatisticalerror.Third,thegrowthinaggregatesupply,oftencalledthegrowthinpotentialoutput,cannotbemeasuredwithcertainty. Inpractice,aspreviouslynoted,monetarypolicymakersdonothaveup-to-the-minuteinformationonthestateoftheeconomyandprices.Usefulinformationislimitednotonlybylagsinthecollectionandavailabilityofkeydatabutalsobylaterrevisions,whichcanalterthepictureconsiderably.Therefore,althoughmonetarypolicymakerswilleventuallybeabletooffsettheeffectsthatadversedemandshockshaveontheeconomy,itwillbesometimebeforetheshockisfullyrecognizedand—giventhelagbetweenapolicyactionandtheeffectoftheactiononaggregatedemand—anevenlongertimebeforeitiscountered.Addtothistheuncertaintyabouthowtheeconomywillrespondtoaneasingortighteningofpolicyofagivenmagnitude,anditisnothardtoseehowtheeconomyandpricescandepartfromadesiredpathforaperiodoftime. ThestatutorygoalsofmaximumemploymentandstablepricesareeasiertoachieveifthepublicunderstandsthosegoalsandbelievesthattheFederalReservewilltakeeffectivemeasurestoachievethem. Althoughthegoalsofmonetarypolicyareclearlyspelledoutinlaw,themeanstoachievethosegoalsarenot.ChangesintheFOMC'stargetfederalfundsratetakesometimetoaffecttheeconomyandprices,anditisoftenfarfromobviouswhetheraselectedlevelofthefederalfundsratewillachievethosegoals. OpinionsoftheFederalReserve[edit] TheFederalReserveislaudedbysomeeconomists,whilebeingthetargetofscathingcriticismbyothereconomists,legislators,andsometimesmembersofthegeneralpublic.TheformerChairmanoftheFederalReserveBoard,BenBernanke,isoneoftheleadingacademiccriticsoftheFederalReserve'spoliciesduringtheGreatDepression.[61] Achievements[edit] Oneofthefunctionsofacentralbankistofacilitatethetransferoffundsthroughtheeconomy,andtheFederalReserveSystemislargelyresponsiblefortheefficiencyinthebankingsector.TherehavealsobeenspecificinstanceswhichputtheFederalReserveinthespotlightofpublicattention.Forinstance,afterthestockmarketcrashin1987,theactionsoftheFedaregenerallybelievedtohaveaidedinrecovery.Also,theFederalReserveiscreditedforeasingtensionsinthebusinesssectorwiththereassurancesgivenfollowingthe9/11terroristattacksontheUnitedStates.[62] Criticisms[edit] TheFederalReservehasbeenthetargetofvariouscriticisms,involving:accountability,effectiveness,opacity,inadequatebankingregulation,andpotentialmarketdistortion.FederalReservepolicyhasalsobeencriticizedfordirectlyandindirectlybenefitinglargebanksinsteadofconsumers.Forexample,regardingtheFederalReserve'sresponsetothe2007–2010financialcrisis,NobellaureateJosephStiglitzexplainedhowtheU.S.FederalReservewasimplementinganothermonetarypolicy—creatingcurrency—asamethodtocombattheliquiditytrap.[63] Bycreating$600billionandinsertingthisdirectlyintobankstheFederalReserveintendedtospurbankstofinancemoredomesticloansandrefinancemortgages.However,banksinsteadwerespendingthemoneyinmoreprofitableareasbyinvestinginternationallyinemergingmarkets.BankswerealsoinvestinginforeigncurrencieswhichStiglitzandotherspointoutmayleadtocurrencywarswhileChinaredirectsitscurrencyholdingsawayfromtheUnitedStates.[64] Auditing[edit] TheFederalReserveissubjecttodifferentrequirementsfortransparencyandauditsthanothergovernmentagencies,whichitssupportersclaimisanotherelementoftheFed'sindependence.AlthoughtheFederalReservehasbeenrequiredbylawtopublishindependentlyauditedfinancialstatementssince1999,theFederalReserveisnotauditedinthesamewayasothergovernmentagencies.Someconfusioncanarisebecausetherearemanytypesofaudits,including:investigativeorfraudaudits;andfinancialaudits,whichareauditsofaccountingstatements;therearealsocompliance,operational,andinformationsystemaudits. TheFederalReserve'sannualfinancialstatementsareauditedbyanoutsideauditor.Similartoothergovernmentagencies,theFederalReservemaintainsanOfficeoftheInspectorGeneral,whosemandateincludesconductingandsupervising"independentandobjectiveaudits,investigations,inspections,evaluations,andotherreviewsofBoardprogramsandoperations."[65]TheInspectorGeneral'sauditsandreviewsareavailableontheFederalReserve'swebsite.[66][67] TheGovernmentAccountabilityOffice(GAO)hasthepowertoconductaudits,subjecttocertainareasofoperationsthatareexcludedfromGAOaudits;otherareasmaybeauditedatspecificCongressionalrequest,andhaveincludedbanksupervision,governmentsecuritiesactivities,andpaymentsystemactivities.[68][69]TheGAOisspecificallyrestrictedanyauthorityovermonetarypolicytransactions;[68]theNewYorkTimesreportedin1989that"suchtransactionsarenowshieldedfromoutsideaudit,althoughtheFedinfluencesinterestratesthroughthepurchaseofhundredsofbillionsofdollarsinTreasurysecurities."[70]Asmentionedabove,itwasin1999thatthelawgoverningtheFederalReservewasamendedtoformalizethealready-existingannualpracticeoforderingindependentauditsoffinancialstatementsfortheFederalReserveBanksandtheBoard;[71]theGAO'srestrictionsonauditingmonetarypolicycontinued,however.[69] Congressionaloversightonmonetarypolicyoperations,foreigntransactions,andthe FOMCoperationsisexercisedthroughtherequirementforreportsandthroughsemi-annualmonetarypolicyhearings.[69]ScholarshaveconcededthatthehearingsdidnotproveaneffectivemeansofincreasingoversightoftheFederalReserve,perhapsbecause"CongresspersonsprefertobashanautonomousandsecretiveFedforeconomicmisfortuneratherthantosharetheresponsibilityforthatmisfortunewithafullyaccountableCentralBank,"althoughtheFederalReservehasalsoconsistentlylobbiedtomaintainitsindependenceandfreedomofoperation.[72] Fulfillmentofwidereconomicgoals[edit] Bylaw,thegoalsoftheFed'smonetarypolicyare:highemployment,sustainablegrowth,andstableprices.[73] CriticssaythatmonetarypolicyintheUnitedStateshasnotachievedconsistentsuccessinmeetingthegoalsthathavebeendelegatedtotheFederalReserveSystembyCongress.Congressbegantoreviewmoreoptionswithregardtomacroeconomicinfluencebeginningin1946(afterWorldWarII),withtheFederalReservereceivingspecificmandatesin1977(afterthecountrysufferedaperiodofstagflation). ThroughouttheperiodoftheFederalReservefollowingthemandates,therelativeweightgiventoeachofthesegoalshaschanged,dependingonpoliticaldevelopments.[citationneeded]Inparticular,thetheoriesofKeynesianismandmonetarismhavehadgreatinfluenceonboththetheoryandimplementationofmonetarypolicy,andthe"prevailingwisdom"orconsensusviewoftheeconomicandfinancialcommunitieshaschangedovertheyears.[74] Elasticcurrency(magnitudeofthemoneymultiplier):thesuccessofmonetarypolicyisdependentontheabilitytostronglyinfluencethesupplyofmoneyavailabletothecitizens.Ifacurrencyishighly"elastic"(thatis,hasahighermoneymultiplier,correspondingtoatendencyofthefinancialsystemtocreatemorebroadmoneyforagivenquantityofbasemoney),planstoexpandthemoneysupplyandaccommodategrowthareeasiertoimplement.LowelasticitywasoneofmanyfactorsthatcontributedtothedepthoftheGreatDepression:asbankscutlending,themoneymultiplierfell,andatthesametimetheFederalReserveconstrictedthemonetarybase.Thedepressionofthelate1920sisgenerallyregardedasbeingtheworstinthecountry'shistory,andtheFederalReservehasbeencriticizedformonetarypolicywhichworsenedthedepression.[75]Partlytoalleviateproblemsrelatedtothedepression,theUnitedStatestransitionedfromagoldstandardandnowusesafiatcurrency;elasticityisbelievedtohavebeenincreasedgreatly.[76] Highemployment–Unemploymenthasexperiencedsignificantincreasesonoccasion,despitetheeffortsoftheFederalReserve.[77]Theseperiodsincludetheearly1990srecessioncausedbythesavingsandloancrisis,theburstingofthedot-combubbleandthe2006burstingofthehousingbubbleplusthe2007subprimemortgagefinancialcrisis.Insomecases,theFederalReserveintentionallysacrificedemploymentlevelsinordertoreininspirallinginflation,aswasthecasefortheEarly1980srecession,whichwasinducedtoalleviateastagflationproblem. Thevalueof$1overtime,in1776dollars.[78] Stableprices–Whilesomeeconomistswouldregardanyconsistentinflationasasignofunstableprices,[79]policymakerscouldbesatisfiedwith1or2%;[80]theconsensusof"pricestability"constitutinglong-runinflationof1–2%is,however,arelativelyrecentdevelopment,andachangethathasoccurredatothercentralbanksthroughouttheworld.Inflationhasaverageda4.2%increaseannuallyfollowingthemandatesappliedin1977;historicinflationsincetheestablishmentoftheFederalReservein1913hasaveraged3.4%.[81]Incontrast,someresearchindicatesthataverageinflationforthe250yearsbeforethesystemwasnearzeropercent,thoughtherewerelikelysharperupwardanddownwardspikesinthattimeframeascomparedwithmorerecenttimes.[82]Centralbanksinsomeothercountries,notablytheGermanBundesbank,hadconsiderablybetterrecordsofachievingpricestabilitydrawingonexperiencefromthetwoepisodesofhyperinflationandeconomiccollapseunderthecountry'spreviouscentralbank. InflationworldwidehasfallensignificantlysinceformerFederalReserveChairmanPaulVolckerbeganhistenurein1979,aperiodwhichhasbeencalledtheGreatModeration;somecommentatorsattributethistoimprovedmonetarypolicyworldwide,particularlyintheOrganisationforEconomicCo-operationandDevelopment.[83][84]BusinessWeeknotesthatinflationhasbeenrelativelylowsincemid-1980s[85]anditwasduringthistimethatVolckerwrote(in1995),"Itisasoberingfactthattheprominenceofcentralbanks[suchastheFederalReserve]inthiscenturyhascoincidedwithageneraltendencytowardsmoreinflation,notless.Byandlarge,iftheoverridingobjectiveispricestability,wedidbetterwiththenineteenth-centurygoldstandardandpassivecentralbanks,withcurrencyboards,orevenwith'freebanking.'." Sustainablegrowth–Thegrowthoftheeconomymaynotbesustainableastheabilityforhouseholdstosavemoneyhasbeenonanoveralldecline[86]andhouseholddebtisconsistentlyrising.[87] CausesofTheGreatDepression[edit] Mainarticle:CausesoftheGreatDepression   Inflation  Deflation  M2moneysupplyincreasesYear/Year MoneysupplydecreasedsignificantlybetweenBlackTuesdayandtheBankHolidayinMarch1933whenthereweremassivebankruns MonetaristsbelievethattheGreatDepressionstartedasanordinaryrecession,butthatsignificantpolicymistakesbymonetaryauthorities(especiallytheFederalReserve)causedashrinkingofthemoneysupply,whichgreatlyexacerbatedtheeconomicsituation,causingarecessiontodescendintotheGreatDepression. Publicconfusion[edit] TheFederalReservehasestablishedalibraryofinformationontheirwebsites,however,manyexpertshavespokenaboutthegenerallevelofpublicconfusionthatstillexistsonthesubjectoftheeconomy;thislackofunderstandingofmacroeconomicquestionsandmonetarypolicy,however,existsinothercountriesaswell.CriticsoftheFedwidelyregardthesystemasbeing"opaque",andoneoftheFed'smostvehementopponentsofhistime,CongressmanLouisT.McFadden,evenwentsofarastosaythat"EveryefforthasbeenmadebytheFederalReserveBoardtoconcealitspowers...."[88][unreliablesource?] Thereare,ontheotherhand,manyeconomistswhosupporttheneedforanindependentcentralbankingauthority,andsomehaveestablishedwebsitesthataimtoclearupconfusionabouttheeconomyandtheFederalReserve'soperations.TheFederalReservewebsiteitselfpublishesvariousinformationandinstructionalmaterialsforavarietyofaudiences. Criticismofgovernmentinterference[edit] Someeconomists,especiallythosebelongingtotheheterodoxAustrianSchool,criticizetheideaofevenestablishingmonetarypolicy,believingthatitdistortsinvestment.FriedrichHayekwontheNobelPrizeforhiselaborationoftheAustrianbusinesscycletheory. Briefly,thetheoryholdsthatanartificialinjectionofcredit,fromasourcesuchasacentralbankliketheFederalReserve,sendsfalsesignalstoentrepreneurstoengageinlong-terminvestmentsduetoafavorablylowinterestrate.However,thesurgeofinvestmentsundertakenrepresentsanartificialboom,orbubble,becausethelowinterestratewasachievedbyanartificialexpansionofthemoneysupplyandnotbysavings.Hence,thepoolofrealsavingsandresourceshavenotincreasedanddonotjustifytheinvestmentsundertaken. Theseinvestments,whicharemoreappropriatelycalled"malinvestments",arerealizedtobeunsustainablewhentheartificialcreditspigotisshutoffandinterestratesrise.Themalinvestmentsandunsustainableprojectsareliquidated,whichistherecession.Thetheorydemonstratesthattheproblemistheartificialboomwhichcausesthemalinvestmentsinthefirstplace,madepossiblebyanartificialinjectionofcreditnotfromsavings. AccordingtoAustrianeconomics,withoutgovernmentintervention,interestrateswillalwaysbeanequilibriumbetweenthetime-preferencesofborrowersandsavers,andthisequilibriumissimplydistortedbygovernmentintervention.Thisdistortion,intheirview,isthecauseofthebusinesscycle.SomeAustrianeconomists—butbynomeansall—alsosupportfullreservebanking,ahypotheticalfinancial/bankingsystemwherebanksmaynotlenddeposits.Othersmayadvocatefreebanking,wherebythegovernmentabstainsfromanyinterferenceinwhatindividualsmaychoosetouseasmoneyortheextenttowhichbankscreatemoneythroughthedepositandlendingcycle. Reserverequirement[edit] TheFederalReserveregulatesbanking,andoneregulationunderitsdirectcontrolisthereserverequirementwhichdictateshowmuchmoneybanksmustkeepinreserves,ascomparedtoitsdemanddeposits.Banksusetheirobservationthatthemajorityofdepositsarenotrequestedbytheaccountholdersatthesametime. UntilMarch2020theFederalReserverequiredthatbankskeep10%oftheirdepositsonhand,butinMarch2020thereserverequirementwasreducedtozero.[89][21]Somecountrieshavenonationallymandatedreserverequirements—banksusetheirownresourcestodeterminewhattoholdinreserve,howevertheirlendingistypicallyconstrainedbyotherregulations.[90]Otherfactorsbeingequal,lowerreservepercentagesincreasesthepossibilityofBankruns,suchasthewidespreadrunsof1931.Lowreserverequirementsalsoallowforlargerexpansionsofthemoneysupplybyactionsofcommercialbanks—currentlytheprivatebankingsystemhascreatedmuchofthebroadmoneysupplyofUSdollarsthroughlendingactivity. Monetarypolicyreformcallingfor100%reserveshasbeenadvocatedbyeconomistssuchas:IrvingFisher,[91]FrankKnight,[92]manyecologicaleconomistsalongwitheconomistsoftheChicagoSchoolandAustrianSchool.Despitecallsforreform,thenearlyuniversalpracticeoffractional-reservebankinghasremainedintheUnitedStates. Criticismofprivatesectorinvolvement[edit] Historicallyandtothepresentday,varioussocialandpoliticalmovements(suchassocialcredit)havecriticizedtheinvolvementoftheprivatesectorin"creatingmoney",claimingthatonlythegovernmentshouldhavethepowerto"makemoney".Someproponentsalsosupportfullreservebankingorothernon-orthodoxapproachestomonetarypolicy.Variousterminologymaybeused,including"debtmoney",whichmayhaveemotiveorpoliticalconnotations.Thesearegenerallyconsideredtobeakintoconspiracytheoriesbymainstreameconomistsandignoredinacademicliteratureonmonetarypolicy.[citationneeded] Seealso[edit] Freebanking HistoryofmonetarypolicyintheUnitedStates ModernMonetaryTheory Treasurybills References[edit] ^"FederalReserveBoard-Purposes&Functions". ^https://www.federalreserve.gov/aboutthefed/files/pf_3.pdf[bareURLPDF] ^ab"GreatDepressionblogging".17January2008.Archivedfromtheoriginalon2014-05-28.Retrieved2016-02-07.PaulKrugman,"GreatDepressionBlogging,"January17,2008:"MonetarybaseonlygetscreatedordestroyedthroughFedactions. ^Everett,Ray,Dr."Economics:TheoryandPractice"(Seventh ed.).JohnWiley&Sons,Inc.Archivedfromtheoriginalon2008-09-13.Retrieved2008-01-11.{{citejournal}}:Citejournalrequires|journal=(help) ^abcde"ACaseStudy:TheFederalReserveSystemandMonetaryPolicy".Retrieved2008-01-11.Asbanksincreaseordecreaseloans,thenation'smoneysupplyincreasesordecreases. ^Cacy,J.A.(November1976)."CommercialBankLoansandtheMoneySupply"(PDF).MonthlyReview.FederalReserveBankofKansasCity:3.Retrieved2008-01-25.Banklending,however,isonlyoneofseveralsourcesofpotentialincreaseinthenarrowlydefinedmoneysupply.Anothersourceistheinvestingactivityofcommercialbanks.Asinthecaseofloans,whenbanksacquireinvestments,suchasUnitedStatesGovernmentsecurities,thepublicmayusetheproceedstoaugmentitsM1balances.Athirdsourceofpotentialincreaseinmoneybalancesistheasset-acquiringactivitiesoftheFederalReserveSystem.WhentheFederalReservebuysU.S.Governmentsecurities,theproceedspotentiallymaybeusedbythepublictoaddtoitsM1balances. ^"FinancialTimes".Archivedfromtheoriginalon2007-12-26.Retrieved2008-02-03.WillemBuiter,Professor,LondonSchoolofEconomics,"LongLiveDebt",FinancialTimes"MavereconBlog",October13,2007." ^Cox,Jeff(August27,2020)."PowellannouncesnewFedapproachtoinflationthatcouldkeeprateslowerforlonger".CNBC. ^"SpeechbyChairPowellonneweconomicchallengesandtheFed'smonetarypolicyreview".BoardofGovernorsoftheFederalReserveSystem. ^https://www.igmchicago.org/surveys/fed-strategy/ ^Flaherty,Edward(2003-03-06)."ABriefHistoryofCentralBankingintheUnitedStates".DepartmentofHumanitiesComputing.Archivedfromtheoriginalon2004-12-13.Retrieved2008-02-01. ^"IstheFederalReserveaprivatelyownedcorporation?".FederalReserveBankofSanFrancisco.Retrieved2008-01-12.the12FederalReserveBanksarecharteredasprivatecorporations ^"Lewisv.UnitedStates,680F.2d1239(9thCir.1982)".Archivedfromtheoriginalon2013-04-15.Retrieved2008-02-17.Thecourtstated"ExaminingtheorganizationandfunctionoftheFederalReserveBanks,andapplyingtherelevantfactors,weconcludethattheReserveBanksarenotfederalinstrumentalitiesforpurposeoftheFTCA,butareindependent,privatelyownedandlocallycontrolledcorporations." ^"FrequentlyAskedQuestions:boardofgovernors".FederalReserveBankofRichmond.Retrieved2008-01-06. ^"FederalReserveBoard-Purposes&Functions".federalreserve.gov.ArchivedfromtheoriginalonJune15,2013. ^Stevenson,RichardW.(1996-03-27)."GreenspanCallstheFed'ExtraordinarilyWellRun'".NewYorkTimes.Retrieved2008-01-06. ^abHassett,Kevin."HowtheFedWorks".TheAmericanEnterpriseInstituteforPublicPolicyResearch.Archivedfromtheoriginalon2007-12-23.Retrieved2008-01-12. ^"FedAppointments". ^"FederalReserveSystem:TheSurplusAccount".UnitedStatesGeneralAccountingOffice.Archivedfromtheoriginalon2012-08-01.Retrieved2008-01-12. ^"Archivedcopy".Archivedfromtheoriginalon2014-03-12.Retrieved2008-02-01.{{citeweb}}:CS1maint:archivedcopyastitle(link)EdwardFlaherty,DepartmentofEconomics,CollegeofCharleston(S.C.),"DebunkingtheFederalReserveConspiracyTheories",PublicEye(PoliticalResearchAssociates). ^ab"PolicyTools—ReserveRequirements".FederalReserve.February3,2021.Retrieved2021-03-16. ^IrelandP(2019)."InterestonReserves:HistoryandRationale,ComplicationsandRisks".CatoJournal.39(2):327–337. ^"2008MonetaryPolicyReleases".FederalReserve.October6,2008.Retrieved2021-03-25. ^"FederalFundsandInterestonReserves-Fedpoints-FEDERALRESERVEBANKofNEWYORK".Archivedfromtheoriginalon2016-08-20.Retrieved2011-08-29."FederalFunds",Fedpoints,FederalReserveBankofNewYork ^"Reserverequirements",Fedpoints,FederalReserveBankofNewYork ^"TheFed-MoneyStockMeasures-H.6Release-December28,2021".www.federalreserve.gov.Retrieved2022-01-14. ^Schenk,Robert,Ph.D."FromCommoditytoBank-DebtMoney".Retrieved2008-01-07. ^"ReserveRequirements".Retrieved2008-01-07. ^"FrequentlyAskedQuestionsaboutthePublicDebt".U.S.DepartmentoftheTreasury,BureauofthePublicDebt.Retrieved2008-01-06. ^"TheFederalReserve'sBeigeBook".TheFederalReserveBankofMinneapolis.Archivedfromtheoriginalon2007-12-05.Retrieved2008-01-06. ^"TheFederalReserve,MonetaryPolicyandtheEconomy".TheFederalReserveBankofDallas.Archivedfromtheoriginalon2007-12-22.Retrieved2008-01-06. ^Davies,Phil."RightonTarget".Archivedfromtheoriginalon2007-12-18.Retrieved2008-01-07.FederalReserveBankofMinneapolis ^ab"OpenMarketOperations".FederalReserveBankofNewYork.Retrieved2008-01-11.OpenmarketoperationsenabletheFederalReservetoaffectthesupplyofreservebalancesinthebankingsystem. ^ab"TheFirst90YearsoftheFederalReserveBankofBoston".FederalReserveBankofBoston.ArchivedfromtheoriginalonNovember17,2007.Retrieved2008-01-11.Openmarketoperationsbecometheprimarytoolforcarryingoutmonetarypolicy,withdiscountrateandreserverequirementchangesusedasoccasionalsupplements. ^ab"ReserveRequirements".Retrieved2008-01-10.FederalReserveBankofNewYork ^abSchwartz,AnnaJ."MoneySupply".TheConciseEncyclopediaofEconomics.Retrieved2008-01-11.IftheFederalReserveincreasesreserves,asinglebankcanmakeloansuptotheamountofitsexcessreserves,creatinganequalamountofdeposits ^abcSimons,HowardL."Don'tBlame(orCredit)theFed".Archivedfromtheoriginalon2006-05-13.Retrieved2008-01-11.TheFederalReserve'sopenmarketoperationsaffecttheleveloffreereservesinthebankingsystem.Itisthelendingofthesefreereservesthroughoutthebankingsystemthatexpandsthesupplyofcredit. ^abcdNichols,DorothyM(May1961).ModernMoneyMechanics(PDF).FederalReserveBankofChicago.p. 3.Archivedfromtheoriginal(PDF)on2008-05-16.Retrieved2008-01-11.Theactualprocessofmoneycreationtakesplaceprimarilyinbanks.Asnotedearlier,checkableliabilitiesofbanksaremoney.Theseliabilitiesarecustomers'accounts.Theyincreasewhencustomersdepositcurrencyandchecksandwhentheproceedsofloansmadebythebanksarecreditedtoborrowers'accounts.AltURL ^ab"MoneyMultiplier".Retrieved2008-01-11....borrowersarealsoinclinedtoconvertcheckabledepositsintocurrency. ^"FactSheets:Currency&Coins".UnitedStatesDepartmentoftheTreasury.Archivedfromtheoriginalon2008-01-11.Retrieved2008-01-22. ^"DistributionofCurrencyandCoins".www.treasury.gov.Retrieved2022-01-03. ^"MoneyFacts".UnitedStatesTreasury,BureauofEngravingandPrinting.ArchivedfromtheoriginalonSeptember28,2007.Retrieved2008-01-06. ^FederalReserveBankofNewYork,2007AnnualReportArchivedOctober19,2012,attheWaybackMachine,Noteh:FederalReserveNotes(p.12):"TheFederalReserveActprovidesthatthecollateralsecuritytenderedbytheReserveBank...mustbeatleastequaltothesumofnotesappliedforbysuchReserveBank." ^Schenk,RobertE.,Ph.D."FromCommoditytoBank-DebtMoney".Retrieved2008-01-11.Moneycreationwasaby-productofthemakingoftheloan. ^Marshall,David."OriginsoftheuseofTreasurydebtinopenmarketoperations:Lessonsforthepresent"(PDF).FederalReserveBankofChicago.p. 2.Archivedfromtheoriginal(PDF)on2008-05-29.Retrieved2008-02-04.Thus,toacloseapproximation,everydollar'sworthofM0incirculationismatchedontheFed'sbalancesheetbyonedollar'sworthofU.S.Treasurysecuritiesacquiredthroughopenmarketpurchases. ^abMings,Turley;Marlin,Matthew."TheStudyofEconomics:Principles,Concepts&Applications"(Sixth ed.).TheMcGraw-HillCompanies.{{citejournal}}:Citejournalrequires|journal=(help) ^Cunningham,Steve,Ph.D."ECON111PrinciplesofMacroeconomics:LectureNotes".KentStateUniversity.Archivedfromtheoriginalon2008-05-29.Retrieved2008-01-07.{{citejournal}}:Citejournalrequires|journal=(help) ^Roy,Udayan."IntroductiontoEconomics".LongIslandUniversity.Archivedfromtheoriginalon2008-05-29.Retrieved2008-01-12.Ultimatelyallofthenewlyprintedcashmustendupasrequiredreserves. ^abcdDaly,Herman."EcologicalEconomics:TheConceptofScaleandItsRelationtoAllocation,Distribution,andUneconomicGrowth"(PDF).UniversityofMaryland.Archivedfromtheoriginal(PDF)on2006-09-21.Retrieved2008-01-11. ^"HowCurrencyGetsintoCirculation".FederalReserveBankofNewYork.Retrieved2008-01-11.VirtuallyallofcurrencynotesinuseareFederalReservenotes. ^"WhoarethelargestholdersofU.S.publicdebt?".FederalReserveBankofSanFrancisco.ArchivedfromtheoriginalonNovember2,2011.Retrieved2008-01-06. ^ThomasPalley,"TheCaseAgainstBudgetSurplusesArchivedApril13,2016,attheWaybackMachine,"Challenge,Nov.-Dec.,2001,13-27:"...theinterestratepayableongovernmentdebtestablishesthepureriskfreeinterestratethatprovidesabenchmarkfortheentiresystem." ^"WhatwillhappentotheFedifthenationaldebtispaidoff?".FederalReserveBankofSanFrancisco.Archivedfromtheoriginalon2008-05-26.Retrieved2008-01-06. ^JosephH.Haslag,1998."Seignioragerevenueandmonetarypolicy:somepreliminaryevidenceArchivedOctober6,2006,attheWaybackMachine,"EconomicandFinancialPolicyReview,FederalReserveBankofDallas,issueQIII,pages10-20. ^Daly,HermanE(2007).EcologicalEconomicsandSustainableDevelopment,SelectedEssaysof.EdwardElgarPublishing.ISBN 978-1-84720-101-0. ^Miller,Eric(August27,2004)."ATreatiseontheEcologicalEconomicsofMoney"(PDF).YorkUniversity:72.Archivedfromtheoriginal(PDF)onJuly15,2007.Retrieved2008-01-26.Thegrowthoffractional-reservefiatmoneyisbetterunderstoodasaresponsetothefinancingneedsofeconomicactivities,notthecauseofthoseactivities.{{citejournal}}:Citejournalrequires|journal=(help) ^Calvo,GuillermoA;Reinhart,CarmenM."WhenCapitalInflowsCometoaSuddenStop:ConsequencesandPolicyOptions"(PDF).InternationalMonetaryFund:20.Archivedfromtheoriginal(PDF)on2008-05-29.Retrieved2008-02-04.{{citejournal}}:Citejournalrequires|journal=(help) ^McConnell,C.;Brue,S.(2005).Microeconomics:Principles,Problems,andPolicies.McGraw-HillProfessional.p. 303.ISBN 0-07-287561-5.Retrieved2008-02-06.. ^Schmitt,ElizabethDunne."Mythsvs.RealtiesfortheUnitedStatesFederalReserveSystem".Archivedfromtheoriginalon2008-09-28.Retrieved2008-01-09.ProfessorofEconomics ^BoG2005,pp. 18–21harvnberror:notarget:CITEREFBoG2005(help) ^JosephMason,AliAnari,andJamesKolari,"TheStockofClosedBankDeposits,DurationofCreditChannelEffects,andthePersistenceoftheU.S.GreatDepression"ArchivedJune9,2011,attheWaybackMachine:"SinceBenBernanke's(1983)seminalpaperentitled"NonmonetaryEffectsoftheFinancialCrisisinthePropagationoftheGreatDepression"... ^"FinancialInstabilityandtheFederalReserveasaLiquidityProvider".ArchivedfromtheoriginalonOctober11,2006.Retrieved2008-01-06. ^Stiglitz,Joseph(5November2010)."New$600BFedStimulusFuelsFearsofUSCurrencyWar".DemocracyNow.Retrieved5November2010. ^Wheatley,Jonathan;Garnham,Peter(5November2010)."Brazilin'currencywar'alert".FinancialTimes.Retrieved5November2010. ^"OIG:OfficeofInspectorGeneral".oig.federalreserve.gov.ArchivedfromtheoriginalonApril11,2009. ^FRB:OIG–CompleteListofOIGReports.2007ArchivedOctober2,2013,attheWaybackMachine ^"TheFederalReserveBoard(Senate–March26,1996)".Retrieved2008-01-06. ^ab"Archivedcopy"(PDF).Archived(PDF)fromtheoriginalon2016-03-03.Retrieved2008-02-02.{{citeweb}}:CS1maint:archivedcopyastitle(link)CharlesBowsher,"FederalReserveSystemAudits:RestrictionsonGAO'sAccess",StatementbyCharlesBowsher,ComptrollerGeneraloftheUnitedStates,October27,1993. ^abcSmale,Pauline."StructureandFunctionsofTheFederalReserveSystem"(PDF).CongressionalResearchService.p. 6.Archivedfromtheoriginalon2008-05-29.Retrieved2008-02-01.{{citeweb}}:CS1maint:bot:originalURLstatusunknown(link) ^Uchitelle,Louis(1989-08-24)."MovesOninCongresstoLiftSecrecyattheFederalReserve".NewYorkTimes.Archivedfromtheoriginalon2012-07-12.Retrieved2008-01-06. ^"Archivedcopy".Archivedfromtheoriginalon2012-02-18.Retrieved2008-02-02.{{citeweb}}:CS1maint:archivedcopyastitle(link)FederalReserveAct,Section11b([12USC248b.]). ^Havrilesky,ThomasM.(1995).ThePressuresonAmericanMonetaryPolicy.Springer.p. 113.ISBN 978-0-7923-9561-4.Retrieved2008-02-01. ^"MonetaryPolicy".FederalReserveBankofNewYork.ArchivedfromtheoriginalonDecember8,2007.Retrieved2008-01-06. ^Archivedcopy.Archivedfromtheoriginalon2012-11-14.Retrieved2016-05-18.{{citebook}}:CS1maint:archivedcopyastitle(link)AllanH.Metzler,AHistoryoftheFederalReserve. ^Bernanke,BenS."Money,Gold,andtheGreatDepression".FederalReserveBoard.Retrieved2008-01-06. ^"TheEvolutionofBankinginaMarketEconomy".Retrieved2008-02-06. ^"BusinessCycleExpansionsandContractions".NationalBureauofEconomicResearch,Inc.Archivedfromtheoriginalon2007-10-12.Retrieved2008-02-06. ^PurchasingPowerofMoneyintheUnitedStatesfrom1774to2006ArchivedJuly19,2016,attheWaybackMachinefrommeasuringworth.com ^"LowInflationorNoInflation".Archivedfromtheoriginalon2007-11-03.Retrieved2008-01-06. ^Anderson,RichardG.(2006)."Inflation'sEconomicCost:HowLarge?HowCertain?".FederalReserveBankofSt.Louis–RegionalEconomist.Retrieved2008-01-06.[permanentdeadlink] ^"ConsumerPriceIndex,1913–".FederalReserveBankofMinneapolis.Archivedfromtheoriginalon2007-08-12.Retrieved2008-01-06. ^Sahr,Robert."InflationConversionFactorsforDollars1665toEstimated2017".Archivedfromtheoriginalon2007-12-30.Retrieved2008-01-06. ^JohnTaylor,"MonetaryPolicyandtheLongBoom"ArchivedOctober11,2016,attheWaybackMachine,FederalReserveBankofSt.LouisReview,November–December1998. ^PeterM.Summers,"WhatCausedtheGreatModeration?SomeCross-CountryEvidence"ArchivedOctober31,2013,attheWaybackMachine,KansasCityFederalReserveBank:"Themostcommonexplanationsforincreasedoutputstabilityincludebettermonetarypolicy." ^Ghosh,PalashR."InvestorTIPSforFightingInflation".Theannualinflationratehasbeenrelativelylowsincethemid-1980s ^"PersonalSavingRate".U.S.DepartmentofCommerce,BureauofEconomicAnalysis.Archivedfromtheoriginalon2007-12-17.Retrieved2008-01-06. ^Hodges,MichaelW."GrandfatherEconomicReportseries".Archivedfromtheoriginalon2008-01-17.Retrieved2008-01-06. ^"AnAstoundingExposure".Retrieved2008-01-06. ^"BoardoftheGovernorsoftheFederalReserveSystem".Archivedfromtheoriginalon2012-12-02.InApril2007,thereserverequirementwas10%ontransactiondepositsand0%ontimedeposits ^Clinton,Kevin(1997)."ImplementationofMonetaryPolicyinaRegimewithZeroReserveRequirements".Archivedfromtheoriginalon2016-03-04.Retrieved2013-09-15.{{citejournal}}:Citejournalrequires|journal=(help)KevinClinton,BankofCanada:"ImplementationofMonetaryPolicyinaRegimewithZeroReserveRequirements",BankofCanadaWorkingPaper97–8,1997."Anumberofcountriesnowhavenorequirement,suchasAustralia,Belgium,Canada,SwedenandtheUnitedKingdom." ^Fisher,Irving(1997).100%Money.Pickering&ChattoLtd.ISBN 978-1-85196-236-5. ^Daly,HermanE;Farley,Joshua(2004).EcologicalEconomics:PrinciplesandApplications.IslandPress.p. 250.ISBN 1-55963-312-3. 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