Pros And Cons Of The Federal Reserve System

Independence

After much thought and consideration, I do think that the Federal Reserve System should be free of politics and political pressure. The positions that the Federal Reserve Board Members hold is a ginormous responsibility. Obviously, they play a HUGE role in our economy, and many may argue that that they hold too much power, but I disagree with that. This is their field of expertise.

After reading Chapter 29 and other articles I feel that if the government was in power of the Federal Reserve System and had the ability to influence all their decisions we would be in a very messy system. It is a well-known fact that you cannot make everyone happy, so when you have all the political parties chiming in your ear telling you what to do it doesn’t allow our experts in the Federal Reserve System to use their expertise and make the correct calls. There should not be any room for bias. For example, I feel that if the government had complete control they would be very tempted to just print more money to cover their debts… and while before this class I probably would have thought “well, what’s the problem with that?” I now realize that by doing so you would increase inflation which would in turn damage our economy even more.

Granted, I do believe that there

This policy also would increase consumer confidence and stabilize prices. Another pro is that by reducing government spending we can slow down inflation. The cons of the Restrictive Fiscal Policy are however that there is a slowing down of production. Due to the reduced money supply companies must cut back on their operations or manufacturing; this also leads to a higher unemployment rate. The reduction in the supply of money causes prices to lower and for there to be less of a demand…thus causing a reduction in economic