Monetary policy Essay Example for Free

Monetary policy Essay The Federal Reserve which is commonly referred to as FED is the central authority to the US money and banking system.   It utilizes the monetary policies at its disposal with the aim of ensuring that prices, foreign exchange rates as well as long term interest rates remain stable.   Stability in these three areas is beneficial in as far as investment is concerned and they trigger economic growth.   (McConnell and Brue, 2004). Other objectives of FED include ensuring that the inflation rate is kept relatively low and the employment levels boosted.    The monetary policies adopted include the open market operations, manipulating of the reserve requirement and discount rates. The open market operations refer to the buying of US treasury as well as the federal agency securities with the aim of influencing the money supply and demand. OMO is the most applied tool due to its flexibility in influencing money demand. Fed also ensures that the financial sector remains stable while protecting the interests of the customers due to the realization of the importance of money supply in the economy. (www.federalreserve.gov). One challenge that faces FED as it tries to ensure economic growth through the various monetary policies is the fact that realizing one aim results to another problem or rather poses a different challenge.   Selling government securities with the aim of increasing the money supply in an economy may trigger increased inflation by some margin. Increasing the employment levels also triggers inflation which Fed tries to counter in the first place.   To ensure that the impact of such inflation is contained, it is imperative that Fed sets its target appropriately so that a compromise is attained.   Attaining one objective at the expense of the other should be well addressed. Timing issues which emanates from the fact that there is a time lag between when Fed realizes or rather recognizes a problem and decides to react by selecting an appropriate monetary policy and when the effect of the implemented policy is felt.   To ensure increased efficiency in the monetary policies, Fed must adopt effective tools or strategies of gathering information to ensure that immediate responses are made as demanded by the economy. (McEachern, 2005). Fed structure is quite complex thus making the implementation of its policies difficult and cumbersome. This also contributes to the delayed implementation of monetary policies which has a negative effect in as far as attaining the core objectives is concerned. The board of governors of Fed are also too powerful and can be manipulated easily especially by the political leaders who have some vested interest. The establishment of an effective independent central bank would minimize the chances of political influences which compromise on the effectiveness of Fed. (Baumol and Blinder, 2008). Identify and explain at least three ways that the Federal Reserve affects the banking system through open market operations (OMO). As earlier noted, Fed uses the OMO monetary tool where US treasury and federal agency securities are traded to regulate the money supply in the economy. Buying of federal treasury and agency security is done when the aim of Fed is to reduce the money supply in the economy while selling increases money supply thus used in recessionary times. There can be permanent as well as temporary changes to Fed reserves when outright sales or purchases are made. A system repurchase method can be adopted to impose temporary changes.   Fed purchases government bonds from the public which increases the reserves of the commercial banks after it pays for them. Purchasing such reserves sees the banks increase their reserves in an amount equal to what has been paid for the reserves.   The same case happens when reserves has been purchased from the public. Fed can also sells government securities that are not being used to the commercial banks as well as the general public hence surrendering the securities to the banks or general public who can then draw checks against the deposits made. Through this approach Fed reduces the amount of money supply that is available for the commercial banks which also translates to reduced money supply in the entire economy. (www.federalreserve.gov). Purchasing of government bonds by Fed leads to the reduction of interest rates which encourages banks and households to dispose their reserves to Fed. The selling of such bonds lowers the prices of bonds while increasing the interest rates to make the bonds attractive to the general public as well as the commercial banks. Fed also purchases or sells the treasury bonds or bills which affect their deposits by increasing or decreasing in size. This also affects the volume as well as growth of banks by allowing them to have increased reserves at their disposal thus more to lend to both commercial banks as well as households.   This leads to their increased growth as they make earnings through the interest charged.   The OMO also affects the lending processes as it affects the interest rates which are attached to the bank borrowings and loans. OMO regulates the money supply in an economy by either increasing it or decreasing it. (McConnell and Brue, 2004). Explain how changes in reserve requirements and the discount rate affect the operations of banks and other depository institutions. The discount rates are monetary policy tools that can be used by Fed to influence the money supply and demand in the economy with the aim of influencing economic growth. Discount rates or discount widow can be defined as the rates charged by Fed to commercial banks which in turn affects the amount of money such banks or financial institutions have thus their lending capacity.   The major types of the depository windows by Fed are the primary, secondary and seasonal credits which have varying interest rates. (www.federalreserve.gov). The discount rates attached to primary credit are generally higher than those attached to other short term discounts in the market.   Interest rates charged on secondary credit are also higher than the primary credit interest rate while the seasonal credit discount rates are the average of selected market rates.   When Fed increases the discounts rates it discourages commercial banks from borrowing money from it but a reverse effect is felt when the discount rates are lowered. The amount of money in an economy is increased when banks are encouraged to borrow funds from the Federal Reserve.   The reserve requirement refers to the amount of money or funds that financial institutions are expected to deposit with Fed against their securities.   The amount set as reserve requirement is determined by the board of governors of Fed as guided by the American law and it is held in terms of vault cash. Increasing the reserves requirement rates leads to increased required reserves of what the financial institutions are expected to keep with the Fed and this translates to reduced ability to lend money to both banks as well as household thus reducing the money supply in an economy.   The reserve is also true. (www.federalreserve.gov).

What The United States Can Learn From Japan :: essays research papers

What The United States Can Learn From Japan Japan and the Four Little Dragons in order to achieve their industrialization goals have a diverse set of policies ranging from limited entitlement programs to a education and government bureaucracy that stresses achievement and meritocracy. But one of the most significant innovations of Japan and the Four Little Dragons is there industrial policy which targets improving specific sectors of the economy by focusing R&D, subsidies, and tax incentives to specific industries that the government wants to promote. The United States could adopt some of these industrial policies to help foster emerging high tech businesses and help existing U.S. business remain competitive with East Asia. In Japan the government both during the Meiji period and the post World War II period followed a policy of active, sector selective industrial targeting. Japan used basically the same model during both historical periods. The Japanese government would focus its tax incentive programs, subsidies, and R&D on what it saw as emerging industries. During the Meiji period Japan focused it's attention on emulating western technology such as trains, steel production, and textiles. The Meiji leaders took taxes levied on agriculture to fund the development of these new industries. Following World War II Japanese industries used this same strategic industrial policy to develop the high-tech, steel, and car industries that Japan is known for today. Some American industries are currently heavily supported by the government through subsidies and tax breaks to farmers, steel producers, and other industries that have been hurt by foreign competition because they are predominantly low-tech industries. But this economic policy of the U.S. is almost a complete reversal of the economic policies of Japan and the Four Little Tigers; instead of fostering new businesses and high tech industry it supports out of date and low tech firms who have political clout. The existing economic policy of the United States fails to help high tech businesses develop a competitive advantage on the world market instead it stagnates innovation by providing incentives primarily to existing business. The structure of U.S. industrial policy like the structure of an advance welfare state has emphasized rewarding powerful lobbying groups and has not targeted emerging sectors of the economy. The current U.S. industrial policy is a distribution strategy and not a development strategy. Instead of this ad-hoc industrial policy the United States should follow Japan's model of strategic targeting of emerging technology. The U.S. instead of pouring its money into subsidies and tax breaks for failing low-tech industries should provide loans, subsidies and R&D money for firms that are producing high technology products. Unfortunately, there are several impediments to copying

Mckinsey & Co. Managing Knowledge and Learning

Michelle Abbott Professor Jon Down December 10, 2002 Written Case Analysis McKinsey & Company: Managing Knowledge and Learning Evaluating Gupta’s Four Pronged Plan Rajat Gupta has recently inherited a fast-growing consulting firm with a strong knowledge base and a competitive market position.In order to ensure the future success of McKinsey & Company, however, Gupta faces a number of challenges: he must provide outstanding services to an increasingly sophisticated clientele, offer his employees ongoing education and upwardly mobile career paths, continually enhance McKinsey’s reputation as a leader in the consulting field, and, perhaps most significantly, continue to leverage his company’s knowledge base across divisions while still maintaining the unity and cohesive corporate culture that have always been important to McKinsey.Gupta seems determined to pursue knowledge as the company’s key business driver. Accordingly, his four-pronged plan includes an em phasis on practice development and organizational learning, an annual program called the Practice Olympics, six special initiatives focused on emerging issues, and the expansion of McKinsey’s research institute. But can Gupta successfully tend to all of these initiatives at once without fragmenting the company? And are there critical business areas that he overlooks with this approach? Source: The St. Martin's Handbook, 5th edition, by Andrea A. Lunsford (Bedford/St.Martin's, 2003) 1 Information Sharing & Corporate Unity vs. Cost-Effectiveness Despite its rapid growth, McKinsey & Company is attempting to maintain its â€Å"One Firm† policy in which responsibilities and profits are shared throughout the company rather than solely within offices. Though the company is divided into clientele sectors, centers of competence, and generalists and specialists, the philosophy of unity ensures that knowledge resources are continually distributed across these sectors. Considerabl e effort has been invested in an information infrastucture intended to optimize this sharing of resources.Gupta’s four-pronged plan is designed to further emphasize knowledge sharing in a variety of forums. Gupta should not pursue knowledge sharing without a thorough evaluation of its costs and benefits, however, as well as careful discussion about how knowledge sharing can be implemented most efficiently. While information sharing in an industry such as consulting is of utmost importance, it is an expensive practice. Each time information is documented and shared throughout the company – through whatever medium – costs are incurred, both in labor hours and material resources.There must be a comparable, tangible benefit to sharing information: namely, the knowledge must be usable to the recipient. If the knowledge is not useable to the recipient, sharing it is probably not costeffective. Additionally, Gupta might also reexamine McKinsey’s commitment to un ity in terms of cost-effectiveness. Is it efficient, in other words, to insist on continually sharing knowledge and information resources throughout the firm, or would it be wiser to simply allow some of the fragmentation that is occurring naturally as the company grows and diversifies?As the centers of competence and clientele sectors develop, perhaps some Source: The St. Martin's Handbook, 5th edition, by Andrea A. Lunsford (Bedford/St. Martin's, 2003) 2 would be more efficiently run as autonomous sub-units or even spin-off companies. With good strategy, these sub-units and spin-off companies might even still be able to optimize the parent company’s resources, including McKinsey’s impressive reputation and clientele base. Customer and Other Stakeholder Focus Gupta’s four-pronged plan may also be overlooking customer and market focus.Though benefit to the customer is implicit in his plan for the advancement and sharing of McKinsey’s information resources (i. e. , better knowledge ultimately benefits the client), the customer is not explicitly addressed in the agenda. Gupta’s plan might benefit from a more comprehensive evaluation of customer needs. For example, some clients might value not only cutting-edge information, but affordable rates, information that is sustainable in the long-term, and friendly, helpful, available onsultants who place a premium on customer satisfaction. Indeed, a business that fails, at any stage of strategic planning, to carefully consider customer needs is bound to lose customers in the long run. Similarly, the needs of other stakeholders deserve consideration and inclusion in Gupta’s plan. Those with equity in the company will want to see that Gupta’s emphasis on information sharing enhances the firm’s bottom line. Company employees will want to see that Gupta’s plan opens opportunities for continuing education and career promotion.Indeed, a clear career development an d succession plan will give employees additional incentive to participate in Gupta’s initiatives, such as the Practice Olympics in which employees present innovative ideas that have brought them success to a panel of senior executives. Source: The St. Martin's Handbook, 5th edition, by Andrea A. Lunsford (Bedford/St. Martin's, 2003) 3 Gupta’s Challenge Gupta’s commitment to a corporate atmosphere that values organizational learning is likely to keep McKinsey & Company at the forefront of the consulting industry.In order to guarantee that his four-pronged plan brings success to his company, however, McKinsey must be sure that information sharing is always accompanied by tangible benefits. Where information sharing fails to be useful and therefore costeffective, it should not be required – otherwise, Gupta risks jeopardizing his firm’s positive attitude toward organizational learning. This may necessitate some strategic separation of departments, a d eparture from McKinsey’s â€Å"One Firm† policy.Furthermore, Gupta must ensure that knowledge sharing within the company takes place through a variety of mediums, including traditional face-to-face interactions such as the Practice Olympics and the practice development. Technology should also be used toward this end – group support software systems, for instance, may provide a cost-effective and efficient way to share information across departments. Finally, Gupta should be sure that his approach to moving the organization forward includes a comprehensive evaluation of all the stakeholders’ interests in the firm.Cutting-edge knowledge should not be pursued at all costs. Rather, it should be pursued to the degree that it contributes a net benefit to the company, the company’s employees, and the company’s customers. A greater emphasis on the customer as well as careful analysis of all stakeholders’ interests will be necessary in order f or McKinsey & Company to continue to attract high-potential employees and a profitable clientele. Source: The St. Martin's Handbook, 5th edition, by Andrea A. Lunsford (Bedford/St. Martin's, 2003) 4

Should Homosexuals Have The Same Rights - 1106 Words

Should homosexuals have the same rights as heterosexuals? Regardless of same sex marriage being legal in America, homosexuals have fewer rights than heterosexuals. All people deserve to obtain the same rights and respect regardless of who they choose to love. People are getting disrespected and mistreated all over America, because of which sex they choose to marry. Whether or not one agrees with a person’s sexual orientation or not, it does not give them a right to disrespect and mistreat them. Would it be fair to tell a man and a woman who were in love and legally married, that they are not allowed to adopt a child together? People, who are in love and legally married, are often not allowed to adopt a child, for the sole reason that they married the same sex. Married people, regardless of whom they’ve chosen to marry, have the right to adopt children. Humans that are married to the same sex frequently get denied the right to adopt children as a couple. â€Å"However, one-third of agencies would reject a gay or lesbian applicant.† Turning married people down, who would raise, love and parent a child, solely based upon the couples same sex preference, proves an injustice and unfairness to that couple. Same sex couples have the right to marry, which should give them the right to adopt children. Homosexuals should have the right to adopt. By allowing homosexuals the right to adopt, we are giving more children homes. The main concern with homosexuals becoming parents byShow MoreRelatedGay Marriage Essay1517 Words   |  7 Pagesother people lifestyles can be difficult. For example, some people cannot agree to homosexual marriages; on the other hand, others can agree to live with homosexual marriages. As published in Procon.org, the article â€Å"Gay Marriage† enlists pros of homosexual marriages. 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