Assignment:
Choose a current news article (no overlapping please) that relates to the topics covered in this module. [Note: please select an article that's current, no less than one year old.]
Read the discussion board to ensure the article is not being used by another student.
Post the article name and source to the discussion board.
Summarize the problem cited in the article and propose a solution if available.
Be sure to relate the problem and solution to the textbook and other readings for the week. Articles/topics not related to the weekly learning topics will not receive full credit.
Quantity:
Each student must make a minimum (for a chance at the best score - post early and often) of two posts for each discussion - one initial post and one reply to posts made by your peers.
The initial post must be approximately 200 to 250 words in length
The reply post must be approximately 50 to 75 words in length
Quality:
All posts must be substantive, relevant, and respectful, and contribute value to the discussion. "I agree" types of posts are fine to make, but they do not count towards the minimum posting requirement.
Part 1: Initial post(200 to 250 words)
Topic:
This post serves as a sample post for our course. For this week, I picked the article on President Trump calling for the Federal Reserve to lower the interest rate in order to give economic growth further boost:
https://www.npr.org/2019/08/19/752362309/trump-dismisses-recession-fears-says-fed-must-help-the-economy
As of Monday, August 19th, the stock market has gone up, where the Dow Jones Industrial Average went up by 1%, S&P by 1.2%, and the Nasdaq by 1.35%. While there are a few signs that the economy might be slowing down, for instance, the inverted yield curve from last week, most data such as GDP growth, employment, and consumer spending point to further growth of the economy.
Even as the economy continues to show resilience, the president continues to pressure the Federal Reserve to lower the interest rate. Trade tensions with China and other countries have set back the economy, and this past month, the Fed lowered the interest rate by 25 basis points due to the negative impacts of trade on the U.S. economy.
As you will learn in later chapters about the role of the Federal Reserve on the U.S. economy, it should set its policy on interest rate based on economic data collected independently. The Fed is an independent agency and should set its policy free of policy influence. This is important because of course, the President wants to lower the interest rate not only because he wants the economy to keep growing, but perhaps because he faces scrutiny in the coming reelection and wants the economy to do well so his chance of getting reelected is increased.
We learned in ECON 201 - Principles of Macroeconomics that when the economy is slowing down, that's when the Federal Reserve should lower the interest rate to keep the economy from falling into a recession. Since our economy still shows signs of further growth, it doesn't really make sense to lower the interest rate as the economy doesn't need the monetary stimulus. It seems more likely that the president is simply trying to set monetary policy for his own political agenda.
I think given that economic indicators show signs of growth rather than contraction, the interest rate should be kept at current level. What do you think?
Part 2: reply to posts (50 to 75 words)
More Rate Cuts? Powell Says Fed Is Ready To Help Economy Grow Amid Trade Tensions
In the midst of the recent trade war, President Trump has called for assistance from the Federal Reserve to help stabilize the economy. Despite multiple direct attacks by the President, Federal Reserve Chairman Jerome Powell has managed to keep calm and independent from International Trade disputes which have affected the U.S. economy. Although the Fed lowered interest rates for the first time since 2008 last month, Trump is calling for four times as much to aide the U.S.
It is easy to see why the President would call for such interest rate cuts, however, the Fed cannot be used as a weapon and should not be influenced by the five core principles of banking. In this case, lowering interest rates would create a buying frenzy but would not generate as much return. Moreover, the trade war with China and Germany's economic woes creates an uncertain market for buyers and unnecessary risk. Simply put, there is no reason for the Fed to lower rates any further than they already have.
The Federal Reserve was created to independently observe financial markets and institutions to regulate the flow of wealth. President Trump's attempts to influence the economy benefit no one but himself and his agenda. Allowing him to do so would contradict the sole purpose of the reserve and most likely cause long term damage to our economy. I believe Chairman Powell was correct in his remarks toward our current economic status. "He said the U.S. economy has continued to perform well, driven by consumer spending, but job creation has slowed." Trump's trade wars have given no reason to risk long term economic consequences.
Part 3 Answer questions:
For essay questions, briefly answer each with a paragraph or two.
Each paragraph should contain a minimum of three sentences.
Yes and no answers are not acceptable.
1.a. What is the difference between the Federal Reserve (the Fed) and the Securities & Exchange Commission (SEC)?
b. Are both of these government entities necessary? Why or why not?
2.The government is heavily involved in the financial system. Explain why
3.If the U.S. Securities and Exchange Commission eliminated its requirement for public companies to disclose information about their finances, what would you expect to happen to the stock prices for these companies?
4.Why are large, publicly listed companies much more likely than small businesses to sell financial instruments such as bonds directly to the market, while small businesses get their financing from financial institutions such as banks?
5.In broad terms, explain how a central bank tries to maintain economic and financial stability and encourage economic growth.