Federal Reserve

Forbes  4 hrs ago  Comment 
Turn on the financial news and you will hear a lot of talk about the bursting of a bond bubble once the Fed begins its much telegraphed cycle of rate hikes. Fidelity’s fixed income team doesn’t see it that way. Our bond experts think that...
Wall Street Journal  6 hrs ago  Comment 
Despite the stumble in stocks, auto sales were strong last month. That should reassure the Federal Reserve on consumers’ ability to weather market turmoil.
www.thedailytradingrisk.blogspot.com  6 hrs ago  Comment 
You can't really see it on this chart so you'll have to trust me.  If you use Think or Swim trading platform, you can see this gap waiting to be filled on the YTD Daily bar chart.  The level is 190.40. We could get a very healthy bounce off...
MarketWatch  11 hrs ago  Comment 
The weakest ISM manufacturing report in two years is sure to give the Federal Reserve more to chew over as the central bank prepares to raise interest rates.
Yahoo  Sep 1  Comment 
The market has yet to prove that it has priced in concerns ranging form the China slowdown, emerging-market spillover and Federal Reserve coin toss decision on rates.
The Hindu Business Line  Sep 1  Comment 
Gold edged higher on Tuesday as equities faltered on mounting expectations that the US Federal Reserve will likely go ahead with an interest rate increase this month. Fed Vice-Chairman St...
The Hindu Business Line  Sep 1  Comment 
Wall Street had ended lower on Monday and wrapped up its worst month since 2012 after comments from a senior Federal Reserve official heightened fears among investors of a potential US interest hi...
The Economic Times  Aug 31  Comment 
Purchase of Nifty options, comprising mostly puts, soared to Rs 11,500 crore in August, the highest it has reached so far this year.


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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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