...impact on the economy. There were clues that the economy may have actually slightly contracted instead of expanding. “The United States economy reversed course in the final quarter of 2012 and contracted at a 0.1% rate and was the worst performance since the financial crisis in 2009.” (Mataconis, 2013) . Even with the overall contraction, the economy is not on the brink of a recession or an extended slump. Companies are still spending. The economy we have been living in since 2009 is going to be the new normal. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. The current prime rate is 3.25%, federal discount rate is 0.75%, fed funds rate is 0.25%, and the 11th District cost of funds is 1.071%. Changes made with federal funds rate and the discount rate also dictate changes in the Wall Street Journal prime rate, which is the interest to borrowers. (Bankrate.com, 2013) The current fixed interest rate for credit cards is 13.02% and for variable interest rate for credit cards are at 15.14%. “The unemployment rate falls to 7.8% as the economy creates 114,000 jobs.”...
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...The Current Financial Environment FIS/260-Financial Markets & Institutions: You Can Bank On It Michael Ricks When I first took a look at this assignment I thought it would be easier than it this. I looked for days on the internet trying to find banks or depositories with credit cards with variable interest rates. What I found was many banks with many credits all with annual percentage rates (APR). So to keep my insanity I just looked at three commercial banks. I looked at Bank of America, US Bank, and Regions bank. I looked at all their credit cards student, business, rewards, and secured. Bank of America credit cards Apr varied anywhere from 12.99% to 20.99%. Here is how they get people, 0% introductory APR for the first 12 billing cycles only for purchases. When that cycle ends your rate will depend on your creditworthiness. US Bank does similar and their rates are from 11.99% to 23.99%. Regions is in the same neighborhood starting at 13.99%, 16.99%, or 19.99% based on credit, but can quickly climb to 24.99% or even 29.99%. Every bank I researched, including credit unions, all based the rate that you would receive on your creditworthiness when you open your account. After that, your APR will vary with the market based on the Prime Rate as set out in the Variable-Rate information section of your agreement. The current annual percentage rate (APR) for a new car can vary from bank to bank, amount to amount, and year to year. It is not something that is...
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...September. Both index increases infer growing confidence and positive expectation in current policy. These data will translate to more spending in the aggregate leading to more employment with the probability of increased productivity to supply the demand for goods and services. Consumer Income The US Department of Commerce Bureau of Economic Analysis (BEA) reports personal income increased 0.2 percent for the month of September 2014, and disposable income rising 0.1 percent during the same period. Of note, personal expenditures dropped 0.2 percent equaling this increase. Tis effectively negates any positive contribution to aggregate demand, and in fact, has potential to create an over-supply of goods and services. Interest Rates The Federal Reserve reports no significant changes in key interest rates during the past three months. The...
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...nt-Financial-Environment Final Project: The Current Financial Environment Research and compare the following services provided by three different commercial banks or other depository institutions: the current interest charged on a variable credit card account, the current annual percentage rate for a new car, and the current interest rate on a year fixed mortgage. List the depository institutions and each separate rate. Research and answer the following questions: What is the current prime rate? What is the current federal funds rate? What is the current Fed discount rate? What is the current GDP? Discuss, in a 1,050- to 1,400-word analysis of your findings, the current financial situation, and explain in detail how the federal funds rate and discount rate are related to the prime rate, and how the prime rate in turn is related to the services provided by the banks you researched. Address the following points in particular: a. The date of the last federal funds rate increase or decrease b. The amount of the increase or decrease c. The rational behind the latest increase or decrease d. The effect of the increase or decrease on the overall economy and upon you as an individual. Do not include any specific personal financial data. Cite your sources. Post your analysis to the Assignment section as an attachment. For more Assignments visit:...
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...This summary of the most recent report of the Federal Reserve shows steady growth in regards to the strength of the economy, but slightly less aggressive than last year. It is noted that payroll employment has increased by 210,000 on average per month in comparison to 260,000 last year. The unemployment rate dropped by a quarter percent to 5.3 percent in June. It is estimated that labor market resources are not being fully utilized because part time employees looking for full time remains high even though slightly decreasing. Consumer price inflation remains below the FOMC’s goal of 2 percent. The price index of consumer spending increased a quarter percent since last May. This in part is affected by lowered gas prices. Long run inflation estimates have remained stable and real gross domestic product has been little changed since last year in this first quarter. It is expected that inflation will rise to the expected level in the near future. Longer-term interest rates have increased since last year and auto and student loan balances continue to grow higher. This seems similar to the increase in housing loans in the prior decade. Hopefully the amount of default loans will not arise from poor bundling packages. Borrowing by lower rated businesses has increases rapidly as well. It has maintained to implement a low rate for the Federal Funds rate varying from 0-.25 percent. It plans to raise the federal funds rate once employment figures are up to par and the inflation...
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...risk premium can be an individual stock or the overall stock market provides over a risk-free rate. And the size of the premium will be a standard to compensate with a higher premium in the stock market. Thus, a portfolio manager when the equity risk premium increases in the future， the investors will sell out stock market because the stocks are over priced. So the legislators and pension administrators decide how much to set aside to meet future pension obligations, based upon assessments of equity risk premiums. However the history data of ERP (Equity Risk Premium) from Federal Reserve System shows it keeps low and stable state but increases suddenly since 2006. At the same time the Federal Funds Effective Rate goes down and keeps low state. We know that interest rate is a way to control inflation. Inflation is a factor causes too much money chasing too few goods. “Changes in the federal funds rate affect the behavior of consumers and businesses, but the stock market is also affected,” Said by Jim Mueller (2013), PhD Finance in Washington State University. “As the risk-free rate goes up, the total return required for investing in stocks also increases.” In other words, the "risk-free" rate of return goes up, making these investments more desirable. But is the low interest rate push the equity risk premium rate goes up?...
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...A large number of criticisms have been leveled against the United States federal reserve system. Conduct a web search on the criticisms about the system. Do you agree with these views? Why or why not? What changes would you recommend to the system? While conducting a web search on criticisms concerning the federal reserve system, I found that most of the articles and encyclopedias included the same critiques. One criticism is the Fed’s inability to stop inflation, indicating that inflation was going up at a faster rate than wages, thus leaving people with overall lower wages. (“US real wages fall at fastest rate in 14 years” http://www.ft.com/cms/s/f269a8f4-c173-11d9-943f-00000e2511c8.html) Another criticism involves the legality of the federal system. As others have already stated, the constitution granted the Congress the authority to coin money and regulate the value of the currency. It doesn’t, as Congressman Ron Paul states, “give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.” (“Criticism of the Federal Reserve” http://en.wikipedia.org/wiki/Criticism_of_the_Federal_Reserve) The Fed also stirs up controversy based on the fact that they are owned, through stock issuance, by private member banks, who most likely would not work in the interest of the people. “Charles...
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...day now), I am at the hotel room writing this. So here are the facts from the ground: The park is not packed and according to my family the line ups or waiting for any ride or attraction are very small. In fact two days ago they reported that several rides and/or attractions had no line ups at all. The hotels are not full. EVERY SINGLE hotel here (that I can see) has vacancy. Remember, this is on a school holiday! So just like McDonald’s Big Mac is a good inflation indicator (check it online if you are not familiar with it), in my book Disney World is a good proxy (indicator) of the REAL economic health; based on that I am still very cautious about the strength of the US economic recovery and what I am being fed by the Cartel (Federal Reserve), the White House, the various US government agencies and of course the typical US media which is nothing more than the “repeat after me” (reporting what they are being fed, not what they searched and/or investigated)...
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...the Federal Reserve System is too secretive, too independent, too insensitive to the hopes of small borrowers. A sharecropper's son, he often charges that it is a tool of Wall Street bankers. http://www.time.com/time/magazine/article/0,9171,870767,00.html Banking: Fight over the Federal Reserve Intense criticism among the general public was a major feature of the 2010 midterm elections. Critics reached a wide audience that reacted against the Troubled Asset Relief Program of 2008-9 and the bailout of major banks, insurance and mortgage companies, as well as the industrial companies General Motors and Chrysler. http://en.wikipedia.org/wiki/Criticism_of_the_Federal_Reserve Criticism of the Federal Reserve The fundamental promise of a central bank like the Federal Reserve is economic stability. The theory is that manipulating the value of the currency allows financial booms to go higher, and crashes to be more mild. If growth becomes speculative and unsustainable, the central bank can make the price of money go up and force some deleveraging of risky investments - again, promising to make the crashes more mild. During the Panic of 1907, "Depositors 'run' on the Knickerbocker Bank. J.P. Morgan and James Stillman of First National City Bank (Citibank) act as a "central bank," providing liquidity ... [to stop the bank run] President Theodore Roosevelt provides Morgan with $25 million in government funds ... to control the panic. Morgan, acting as a one-man central bank...
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...Who Is The Federal Reserve Chairman? Ben S. Bernanke is the chairman for the Federal Reserve. Dr. Bernanke was born in December 1953 in Augusta, Georgia, and grew up in Dillon, South Carolina. His father Philip was a pharmacist that managed a theater part-time and his mother Edna was an elementary schoolteacher. Bernanke has a brother and sister and is the eldest. His younger brother, Seth, is a lawyer in Charlotte, North Carolina, and his younger sister, Sharon, is a longtime administrator at Berklee College of Music in Boston. As a teenager, Bernanke worked construction on a new hospital and waited tables at a restaurant at nearby South of the Border, a roadside attraction in his hometown of Dillon, before leaving for college. Bernanke met his wife Anna, a schoolteacher, on a blind date. She was a student at Wellesley College, and he was in graduate school at MIT. The Bernanke’s have two children. He received a B.A. in economics in 1975 from Harvard University, and a Ph.D. in economics in 1979 from the Massachusetts Institute of Technology. Bernanke originally took office as Chairman on February 1, 2006, when he also began a 14-year term as a member of the Board. Before his appointment as Chairman, Dr. Bernanke was Chairman of the President's Council of Economic Advisers, from June 2005 to January 2006. By virtue of the chairmanship, he sits on the Financial Stability Oversight Board that oversees the Troubled Asset Relief Program. He also serves as Chairman of the...
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...FEDERAL STATE-FUNDED EDUCATIONAL INSTITUTION OF HIGHER PROFESSIONAL EDUCATION FINANCIAL UNIVERSITY UNDER THE GOVERNMENT OF THE RUSSIAN FEDERATION Department of Macroeconomic Research paper “Banking system and its role in national economy of the USA” Prepared by Yusifova Sevindzh Supervisor: Orusova O. V. Department of Macroeconomics Moscow-2014 Contents Introduction 1. Federal Reserve System as the central banking system in the USA 1.1. The essence of Federal Reserve System and its main functions 1.2. Federal Deposit Insurance Corporation and Member Banks 1.3. The role of Federal Reserve System in national economy of the USA 1. Special features of the Federal Reserve System 2.1. The implementation of Monetary Policy 2.2. Integration with International Sphere 2.3. Rise and fall in the Fed’s balance sheet Conclusion References Introduction The Federal Reserve is the central bank of the United States. It was created by Congress to provide the nation with a safer, more flexible and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, with the signing of the Federal Reserve Act by President Woodrow Wilson. Today, the Federal Reserve’s duties fall into four general areas:conducting the...
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...by introducing money directly into the economy to achieve a desired level of inflation. This is what is referred to as quantitative easing (Rothbard, 1999). The central bank does this by buying financial assets from both banks and the private sector, and thus introducing new money into the economy. This paper investigates the efficacy of quantitative easing and its effects to the economy. Typically, central banks stimulate economies by purchasing government bonds to lower short-term interest (Krugman, 2003). However, when the central bank has lowered interest to the point that it is at zero or close to zero without achieving its goals, then it cannot lower it any further. Quantitative easing has the effect of increasing a bank’s excess reserves and increasing the value of said assets. Stripped to its bare bones, quantitative easing basically derives from the belief among some economists that to improve an economy, it is pivotal to have more money circulating (Rothbard, 1999)....
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...Global Economy News： U.S. Tells Berlin To Spend More Url:http://online.wsj.com/news/articles/SB10001424052702303393804579307722825726640?mod=WSJ_economy_LeftTopHighlights BERLIN—The U.S. Treasury renewed its criticism of the German economy's dependence on exports, just as new data showed that the country's trade surplus swelled in November. Treasury Secretary Jacob Lew, visiting Berlin, urged the German government to do more to boost lackluster domestic demand, which the U.S. and others argue is partly to blame for the anemic economic growth in the euro zone as a whole. Do Tax Cheats Solve the U.K.’s Productivity Puzzle? URL:http://blogs.wsj.com/economics/2013/10/22/do-tax-cheats-solve-the-u-k-s-productivity-puzzle/?KEYWORDS=productivity abstract: Economists in Britain have long been scratching their heads over the nation’s troubling “productivity puzzle.” Now Markit, the financial information provider that publishes the purchasing managers’ indexes used to gauge activity in the global economy, has tentatively suggested that former tax cheats might be muddying the waters. Britain has a bigger workforce than it did before it tipped into recession in 2008 yet is producing far fewer goods and services. This mismatch between output and jobs has led to a collapse in productivity, a measure of how effectively an economy uses its resources that’s an important driver of future growth prospects. Bank of Mexico’s Carstens: Inflation to Move Above 4% URL:http://blogs.wsj...
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...What was the Bretton Woods system? Outline its main pillars and discuss to what extent, if any, its architecture led to both post-war stability and prosperity in the developed world throughout capitalism’s ‘golden age’ “50 Years is Enough” In the final months of the Second world war, an architecture of stability for the international economy emerged. The United States and Britain, having already committed to each other with the signing of Mutual Aid Agreement(1941)1, vied to create a multilateral economic system to replace the international gold standard and its structural rigidity. The Bretton Woods agreement of 1944 established a dollar-gold standard of fixed, but adjustable, exchange rates of $US35 an ounce2. Which, according to Milton Friedman, “carried within it the seeds of its own destruction”3. The Institutions of neo-liberal global economic governance4, were formed; International Monetary Fund, & International Bank for Reconstruction and Development. The Twin Pillars of post-war order5, an “economic super-government”6 essentially adopting both; U.S. Inflation rates.7 and US political policies8. There has been no country in history that has emerged from war into such happy economic circumstances as the United States in 19459. General Maximum Price Regulation(1942) was signed after the attack on Pearl Harbour, controlling most prices beneath a price ceiling until '46, and imposing penalties on violations. In addition to a comprehensive ration system. In order to maximise...
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...“too big to fail” firms 3. It must not be so stifling as to prevent the controlled growth of safe and profitable financial service businesses. Analysis Up to 1999, banking regulation had been fairly constant since the Great Depression ended. The Golden Rule had been the Glass-Steagal Act. The Glass-Steagall Act, was passed by Congress in 1933 and prohibited commercial banks from engaging in the investment business. It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The act was originally part of President Franklin D. Roosevelt’s New Deal program and became a permanent measure in 1945. It gave tighter regulation of national banks to the Federal Reserve System; prohibited bank sales of securities; and created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money appropriated from banks. In 1999, Bill Clinton signed the Gramm-Leach-Bliley Act, a bank deregulation bill that swept away the Depression-era Glass-Steagall law. The new law had such a chorus of bipartisan support that it passed the Senate 90-8. One of the few who raised concerns against it was Senator Byron Dorgan (D-North Dakota). “I think we...
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