Federal Reserve

Reuters  5 hrs ago  Comment 
The Federal Reserve has begun preparing the public and markets for higher inflation, but has left unanswered the question of how high inflation might go and for how long?
newratings.com  Mar 22  Comment 
WASHINGTON (dpa-AFX) - Gold futures nudged higher Wednesday, touching its best levels in three weeks amid geopolitical tensions and dovish hints from the U.S. Federal Reserve. Violence outside the UK parliament in London renewed concerns about...
Clusterstock  Mar 22  Comment 
The US stock market is barely moving.  The S&P 500 closed up, or within 1% of its opening price, for more than 10o days in a row.  Just about every measure of volatility is at a multi-year low.  In other words, it's all quiet. That has...
Motley Fool  Mar 21  Comment 
The good news just keeps on coming for home shoppers.
Clusterstock  Mar 21  Comment 
Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, took central-bank transparency to a new level on Tuesday when he took questions from Twitter users for a full hour — and answered as many as he could with class and often...
MarketWatch  Mar 21  Comment 
A top Federal Reserve policymaker said he doubts a big drop in the U.S. stock market would trigger a broader financial crisis.
Clusterstock  Mar 21  Comment 
Federal Reserve officials sometimes sound out of touch when they describe the labor market as having reached "full employment" when most Americans know full well that the outlook for jobs is still far less rosy than it was before the Great...
The Hindu Business Line  Mar 21  Comment 
Asian shares hit 21-month highs on Tuesday, while the dollar and US bond yields were on the backfoot on the prospect of a less hawkish than previously expected Federal Reserve policy trajectory. M...


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The Federal Reserve is the third central bank of the USA. It was legally established on December 23, 1913, when US president Woodrow Wilson signed the Federal Reserve System Act. The Federal Reserve was blamed to have deepened the Great Depression after the crash of 1929. In a panicky reaction it then deflated money supply, causing a lasting and deep economic contraction.

In the inflationary period from 1973 - caused by the first oil shock - to 1981 chairman Paul Volcker managed to battle inflation successfully by raising the leading interest rate to more than 20%. At the same time Volcker succeeded in keeping the economy out of a drawn-out recession.

The policy style changed with the nomination of Alan Greenspan in 1987. Only 2 months into office Greenspan was confronted with the Black Monday of 1987, when the Dow Jones Industrials Average fell 22%, its biggest loss ever in a day. Remembering the fatal results of tight liqudity after the crash of 1929 Greenspan offered banks all the funds they needed in order to avoid a meltdown of the stock market. Alan Greenspan can also be credited with blowing up the biggest debt bubble of all times in the new millennium. By lowering the Fed Funds rate to a record low of 1% the Federal Reserve contributed heavily to the American housing boom that turned out to be a bubble based on easy credit. Greenspan conceded in 2008 to Congress that he erred on wrong side when the Federal Reserve thought that the financial industry should not be burdened with more oversight. At this time the USA had fallen in the biggest financial crisis ever.

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The Federal Reserve Banks

The 12 Federal Reserve Banks were established by Congress as the operating arms of the nation's central banking system. Many of the services provided to depository institutions and the federal government by this network of Reserve Banks are similar to services provided by commercial banks and thrift institutions to business customers and individuals.

Reserve Banks

  • hold the cash reserves of depository institutions and make loans to them
  • move currency and coin into and out of circulation, and collect and process millions of checks each day
  • provide checking accounts for the Treasury, issue and redeem government securities, and act in other ways as fiscal agent for the U.S. government
  • supervise and examine commercial banks that are members of the Federal Reserve System for safety and soundness
  • participate in the activity that is the primary responsibility of the Federal Reserve System, the setting of monetary policy.
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