Impact of Global Economic Slump in 2008
The impact of the global economic slump on the U.S., with particular emphasis on Jacksonville
MBA Students
Jacksonville University
October 4, 2011
Macroeconomic recessionary forces mire global, national, regional, and local economies
Financial markets wait on the edge of their collective seats for the U.S. Federal Reserve Bank’s Chairman to offer strategic insights into battling the recessionary global economy. All hopes placed on a short statement after each Federal Open Market Committee (FOCM) meeting; but will they take action or merely hint that actions could be taken if needed next month. If the Fed kicks the ball far enough to the right, the Christmas season will be upon us and the national economy will receive a boost from seasonal consumption.
The most recent FOMC meeting produced a highly debated economic strategy touted as “Operation Twist” by the popular press which consists of the Fed buying “$400 billion of U.S. debt with maturities of six to 30 years through June while selling an equal amount of securities due in three years or less” (Eddings & Walker, 2011). While initially met with resistance, as many of the announcements by the FOCM have recently, positive clamor from leading economists now monopolizes the internet news boards. Walker and Eddings cite in their story that long term bond rates have tumbled by as much as 70 basis points in anticipation of the Federal Reserve’s buying spree.
While monetary policy seems to be currently softening the recessionary impact, the Fed has limited tools and ability to impact the flailing global economy.
The Federal Reserve System possesses four basic tools to affect monetary policy; open-market operations, the reserve ratio, the discount rate, and the term auction facility. Using these tools, the Fed can pursue two basic strategies – expansionary and restrictive monetary policy. Since changing the reserve ratio is somewhat of a blunt instrument, and could have undesirable affects on the
MBA Students
Jacksonville University
October 4, 2011
Macroeconomic recessionary forces mire global, national, regional, and local economies
Financial markets wait on the edge of their collective seats for the U.S. Federal Reserve Bank’s Chairman to offer strategic insights into battling the recessionary global economy. All hopes placed on a short statement after each Federal Open Market Committee (FOCM) meeting; but will they take action or merely hint that actions could be taken if needed next month. If the Fed kicks the ball far enough to the right, the Christmas season will be upon us and the national economy will receive a boost from seasonal consumption.
The most recent FOMC meeting produced a highly debated economic strategy touted as “Operation Twist” by the popular press which consists of the Fed buying “$400 billion of U.S. debt with maturities of six to 30 years through June while selling an equal amount of securities due in three years or less” (Eddings & Walker, 2011). While initially met with resistance, as many of the announcements by the FOCM have recently, positive clamor from leading economists now monopolizes the internet news boards. Walker and Eddings cite in their story that long term bond rates have tumbled by as much as 70 basis points in anticipation of the Federal Reserve’s buying spree.
While monetary policy seems to be currently softening the recessionary impact, the Fed has limited tools and ability to impact the flailing global economy.
The Federal Reserve System possesses four basic tools to affect monetary policy; open-market operations, the reserve ratio, the discount rate, and the term auction facility. Using these tools, the Fed can pursue two basic strategies – expansionary and restrictive monetary policy. Since changing the reserve ratio is somewhat of a blunt instrument, and could have undesirable affects on the
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