Post by Admin/YBB on Dec 21, 2020 19:13:33 GMT -6
#MonetaryPolicy refers to the actions of the US #FederalReserve [The Fed] – rate-setting [fed fund rate, discount rate, interest on bank reserves, etc]; buying/selling Treasuries & agency mortgage-backed securities [agency MBS], a process often called QE/QT; serving as lender of last resort to banks; controlling the amount of currency in circulation; providing dollar swap lines to other central banks, etc. Some lesser used tools include setting required bank reserve ratios; initial stock margin [Reg T], etc. So, almost everything related to dollar & money except printing of the currency & issuing the US debt – those are done by the US TREASURY. Federal Reserve Board [FRB] governors/members [full strength 7] are nominated by the President & confirmed by the Senate. The same for the Fed Chair but his/her term is offset by almost 2 years from the Presidential election years. The Federal Reserve system also consists of 12 district FEDERAL RESERVE BANKS headed by their own Presidents – these are mostly privately run but have some public regulatory authority. The NY Federal Reserve Bank [NY Fed] has special role & authority. The Federal Open Market Committee [FOMC] is the US monetary policy making body that has 7 FRB governors [at full strength] & 5 of the 12 district Federal Reserve Bank Presidents on rotating basis. Although all 12 district Federal Reserve Bank Presidents participate in the FOMC meetings, only 5 can vote each year [NY Fed President is always 1 of the 5]. The FOMC meets regularly [8+ times per year]; note that the FOMC has both public & private representations. Monetary policy actions of the FOMC are final & not subject to any further review or approval.
FISCAL POLICY is in the hands of Congress. It can legislate tax incentives & spending for infrastructure & other programs to boost the economy. It has done so especially in the times of recession or depression [1929-39]. To be most effective, monetary & fiscal policies should be coordinated, but the reality is different. The Fed can act much quicker on monetary policy. But the Congress is often slower with fiscal policy because the consents of the House, Senate & President are required. Think of fiscal policy as a slow & long political process. #PersonalFinance 12/15/20.
FISCAL POLICY is in the hands of Congress. It can legislate tax incentives & spending for infrastructure & other programs to boost the economy. It has done so especially in the times of recession or depression [1929-39]. To be most effective, monetary & fiscal policies should be coordinated, but the reality is different. The Fed can act much quicker on monetary policy. But the Congress is often slower with fiscal policy because the consents of the House, Senate & President are required. Think of fiscal policy as a slow & long political process. #PersonalFinance 12/15/20.