The Chairman of the Federal Reserve Board is often described as the most powerful man in America

Posted: November 27th, 2013

Name:

Course:

Lecturer:

Date:

The Chairman of the Federal Reserve Board

Introduction

The Federal Reserve is an equivalent of a central bank in the US. The scheme was instituted in 1913; it maintains the nation’s monetary supplies in twelve reserve depositories held in different districts. Additionally, the system oversees the nation’s monetary policy and financial processes of all commercial financial reservoirs. The Federal Reserve Board comprises of seven individuals and handles the aforementioned tasks of the Federal Reserve. The Chairman acts as the principal overseer of all activities performed by the Federal Reserve. Owing to this position, the Chairman is positioned as the most influential individual in the US. Presently, the position is held by Ben Bernanke, prominently acquainted with economics. Prior to this, Bernanke was an economics expert in Princeton University for seventeen years before his incorporation to the Board in 2002. In 2006, Bernanke was selected as the Board’s Chairman, and the same was renewed in 2010 (Derousseau, 2011).

Policies

The twenty-first century period has marked major economic deepening thus instigating high stagflation. This is a situation marked by enhanced inflation, leading to adverse consequences of economic stagnation. Upon his institution as the Board’s Chairman, the economist first instituted the Bernanke Doctrine, a document holding seven recommendations for dealing with inflation. First, enhancing money supply within the nation would accord a proportionate rise in consumption patterns and subsequently constructive inflation (Trahan and Katherine 239). Secondly, the liquidity aspect should be maintained in such monetary expansions to restrain any additional inflation. Thirdly, zero-lending rates should be applied in financial institutions concerning short-period loaning practices. Diminished returns attached to this strategy are automatically transcribed to long-period investments like the bonds.

Fourth, the Federal Reserve loaning rate to commercial depositories should also be fixed at the zero level. Security offered by financial institutions for this arrangement should be achieved in terms of bonds. Fifth, subjecting the nation’s authorized currency to depreciation while simultaneously enhancing the supply would lessen the recovery duration. Sixth, the Federal Reserve should lessen inflation by according an extensive purchase of other trading currencies held by various nations (Trahan and Katherine 239). Note that, the purchases should not surpass the debt level held by the US to the other nations. Lastly, the Federal Reserve should inject capital in varied industries for enhanced monetary distribution. Bernanke believes that the identified approaches will result in credit easing that is significant in overcoming inflation. The Bernanke Doctrine was actually instituted in 2007. Following the execution episode, lessened unemployment was noted as well as high remunerations within the workforce.

Interest levels were also minimized largely in short period loaning both from Federal Reserve to financial institutes as well as from banks to consumers (Bank for International Settlements Reviews 2). Bernanke is ranked as a powerful individual because he handles the monetary asset of the American nation. America is an influential nation in the world especially in the economic setting as attributable to the dollar’s prevalence in trading practices. With the Federal Reserve storing the nation’s monetary capitals, spending needs in all government institutes have to be certified by the Chairman. The policies thereby instituted by Bernanke also evidence his influence since they were implemented on a national level until his exit from the given position. Additionally, Bernanke also determines critical regulations regarding monetary institutions in aspects like interest levels.

England, its Central Bank and its Monetary Policies

The 1694 Bank of England serves the same purposes as the Federal Reserve under the directorship of Sir Mervyn King. Unlike in the US system where the Federal Reserve has twelve repositories as national reserves, the Bank of England only bears a single repository located in London. Similar to the Federal Reserve Board, the bank has a Court of Directors comprising of nine individuals. US Board members hold given positions for four years whereas in England, the members hold five years. Sir King as the bank’s overseer is well acquainted with economics following his vocation (Bank of England, 2011). Analogous to Bernanke tutoring practices, Sir King was a tutor in the London School of Economics for seven years after which he was assimilated in the Bank of England in 1991. Sir King offered his economics proficiency for twelve years until 2003 when he became the Governor.

England also pursues similar approaches on inflation as noted by the present monetary policy. Analogous to Bernanke’s credit easing, the bank employs the quantitative easing technique that has lessened interest levels to 0.5 percent (Bank of England, 2011). Through this, Sir King believes that money supply will be enhanced and subsequently reduce the inflation in levels as low as two percent. In addition to the interest factor, the strategy will also involve the acquisition of assets from various sectors. Unlike the US approach that will only deal with industries alone in terms of bonds purchases, the Bank of England has a less defined system that only seeks to acquire any asset form undefined traders within the economy. Note that, large efforts will deal with the purchase factor as opposed to the interests. In conclusion, it is apparent that the US and England have a parallel approach to the inflation issue in accordance to monetary policy requirements.

Works Cited

Bank of England. Monetary Policy. 2011. Web. 4 Nov. 2011. <http://www.bankofengland.co.uk/monetarypolicy/index.htm>.

Bank for International Settlements Reviews. Ben S Bernanke: Federal Reserve policies to ease credit and their implications for the Fed’s balance sheet. 18 Feb. 2009. Web. 4 Nov. 2011. <http://www.bis.org/review/r090220a.pdf?frames=0>.

Derousseau, Ryan. “Profile: Ben Bernanke.” The Washington Post 8 Mar. 2011. Web. 4 Nov. 2011. <http://www.whorunsgov.com/Profiles/Ben_Bernanke>.

Trahan, Francois, and Katherine Krantz. The Era of Uncertainty: Global Investment Strategies for Inflation, Deflation, and the Middle Ground. John Wiley & Sons, 2011. Print.