The Federal Reserve And Its Role In The Global Economy
...agricultural, and banking industries. For this reason, the U.S. is a global economy, relying upon foreign investments and trade to create and retain wealth. Over the years, America has evolved from farming-based, to industrial, to a services-based economy. As a result, the banking system from its inception has weathered the many growing pains associated with a new government and currency, instituting regulations and a centralized bank to examine the economy, and implement policies intended to offset factors negatively affecting the general financial health of the country.
Now, as the United States moves towards a globally interdependent marketplace, the stakes are much higher than they were when Congress established the Federal Reserve in the early 1900’s. A country’s debt can now become the world’s debt, and the role of the U.S. federal banking system is now considerably more under pressure and scrutiny than ever before. As we have been seeing with the current liquidity crisis in the U.S., and how it has affected U.K. and Asian markets, strong, comprehensive policy-making is now crucial to sustaining long-term economic viability.
Even despite the growing need for quick, precise actions by the Federal Reserve System, the decision-making regarding the economy often meets with controversy. The recent bail out plan, passed by Congress in October, met with skepticism and is still being questioned as to its effectiveness. As we have seen in the news, the Federal Reserve has taken a strong stance and defends its rationale for its response to the growing crisis.
For these reasons, the Federal Reserve System, while an American institution, is indirectly a global policy-maker, and therefore, its influence is both far-reaching and necessary.
This paper will examine the Federal Reserve Banking System in the United States; how the current liquidity crisis we now...
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