Federalism Debate

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Category: Government
Date added
2021/08/08
Pages:  6
Words:  1944
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How it works

Transactions

An Economy is the sum of the transactions that make it up. In other words the economy simply is the result (as transactions are) of productivity; growth and decay, inflation and deflation, consumer spending; increase and decrease, and interest rates; increase and decrease.

With all the different factors there are two principal factors which contribute to the overall movement. Credit and Interest Rates.

The Economy

A transaction is a two component system in where the seller has a service, product, or financial asset which the buyer wishes to exchange currency, an item of value, or a contractual obligation for it.

The system relies on the subjective nature of an object’s value, to the buyer. The seller will try to gain the most value, while the buyer will try to complete the exchange at the price he is willing to pay.

Consumer spending is the driving force of an economy, as one buyer’s money spent becomes another seller’s income.

As the consumer spends more the seller earns more.

Credit, in time-based economic terms, is short, high volume, and always has an economic downside in the future, whereas productivity always increases as long as innovation takes place. In essence credit the self-borrowing of the consumer’s own future income. This means with credit there must always be a decrease in spending as the consumer in the future must pay back the debt accrued.

What is Credit?

Like basic transactions, there is a two component system for the concept of credit, the lender and the borrower.

The lender typically wants to take their money and make it into more money. The borrower simply wishes to purchase something they cannot afford. Thus to achieve boths’ aspirations, a credit and debt system is formed. The transaction only completes when primum (the initial amount borrowed) plus interest of that premium (the calculable time based addition to the debt) is paid back to the lender fully.

NOTE: Credit with low interest encourages spending as it is less costly to pay off the debt. However, opposingly high interest rates decreases credit thus spending.

Who is Credit and What does Credit Do

Inflation Rates and Interest Rates

Bank (under the jurisdiction of the Federal Reserve, will increase interest rates. As discussed on a previous slide, as interest rates increase, less credit is made thus less spending occurs and the economy slows. At this time deflation begins to occur.

There are two main cycles brought on by the use of credit in the economy; the smaller of the two (business cycle) is directly a result of the Fed’s role in maintaining inflation at a certain rate. This cycle is more commonly known as the ‘boom and bust cycle.’

As transactions occur and more credit is taken out, the immediate revenue flow increases. More income of a consumer leads to more credit they can receive, thus

when put back into the economy that credit becomes someone’s new income increasing at an exponential rate.

With an increase in spending/income via credit, comes the increase in price of all items. This increase in prices of all goods and services is known as inflation.

Uncontrolled inflation of a currency can be detrimental to a nation, for example Venezuela. And due to inflations nature the Central

The Federal Reserve’s Necessity

Any nation’s economy is at risk with so many factors that may contribute to its downfall, this is exactly why a well functioning and decentralized Government Agency is needed.

  • Economic Stability
  • Economic Policy
  • Credit Cycle

Providing a stable economic footing is the primary goal of the organization. This is done primarily via manipulation of the 12 district’s interest rates as to best suit their district’s economies. The decentralized aspect of the system allows for a greater ability to adjust the individual economies providing the entire national economy with stability.

Though scarcely covered, economic policy is another large aspect of the role of the Federal Reserve. However, the general monetary policy made in recent years is not nearly as revolutionary as it once was, as the market system and the way it functions has not changed in over 40 years.

Brought to light by the hands of the leading financial monarchs of the early 1900s, this act would determine the survivability of the early-industrious United States. The reform detailed a purest and capitalist agenda and is the

The framers comprised of Senator Nelson Aldrich and the nations banking and financial elite sought a method for shielding the revitalized and volatile US economy. At the time such a meeting can be considered one of the most influential and important of the century as banking and monetary reform was seen as a key issue in the era.

The Federal Reserve Act

Federalism: The Act Established 12 banks within separate economic districts, which now individually control the respective-encompassed private banks. The decentralized banking network prevented the individual economies from being affected by policy needed by another.

  • The FED’s Control on Interest Rates
  • For the Control & Benefits
  • Against the Control & Hindrances
  • It is considered invasive and unconstitutional

The fact that the agency is governmental and its heavy involvement in the open market, leads many to believe it is an unconstitutional expansion of powers.

  • Increases the credibility and accountability of future policy actions

By the creation of the Federal Reserve System, a slow moving bureaucratic process forms, which prevents false promises and rash decisions to be made when involving the nations financial and monetary policy.

  • It increases transparency and predictability

Through the explanation and clarity of the agency’s financial/economic targets, predictions and security can be found by lenders and creditors.

  • The Connection With the Congress
  • Recent Legislation Passed for the FED
  • Continuing Appropriations Act, 2020, and Health Extenders Act of 2019

H.R. 4378

Democrat Nita Lowey of New York’s 17th district

Due to the nature of the bill, “Making continuing appropriations for fiscal year 2020,” (govtrack.us) it was met with little ideological resistance, and thus the time it took from introduction to passing as law was nine days.

Appropriations Committee: A committee within the United States House of Representatives known as a “power committee” as it possesses the ‘power of the purse.’

Budget Committee: A committee whose primary responsibility is to draft and prepare the Concurrent Resolution on the Budget, which sets the coming fiscal year’s budget.

Congressional Effectiveness on Legislation for the FED

The Federal Reserve is seen as an asset to most committees within congress, as though the power of the purse resides within congress, the slow moving madisonian model prevents radical movement of policy or action. To have pull or control over the monetary policy enforcer may allow the legislators to claim credit for their constituents’ vote on the positive effects policies may have. In the eyes of the founders of the Federal Reserve Act, the intent and methods to achieve it have been and continue to be acceptable.

The Connection With the President

  • The Federal Reserve’s Role in the Open Market
  • Conducting the Nation’s Monetary Policy
  • Maintaining the Stability of the Financial System
  • Supervising and Regulating Financial Institutions
  • Fostering Payment and Settlement Systems
  • Promoting Consumer Protection and Community Development
  • Formal Cooperation Between the Three Branches
  • Congress
  • President
  • Judiciary

The FOMC is the committee which ‘decides the fate’ of the free and open market. The 7 members of the board decide on key factors which can either promote growth or decay in respect to the overall inflation of the US economy.

The President appoints the members to the board and with Senate approval they are placed among the 7.

The president will appoint members of the FOMC, he/she will also be in charge of maintaining the order in the institution.

The Judicial aspect of the federal reserve system, comes in when they are accused of crimes or any of the officials are as well.

The Connection With the Federal Judiciary

Federal Open Market Committee of the Federal Reserve System v. Merrill

In late 1978, the brokerage company Merrill filed a lawsuit against the Federal Open Market Committee, one of the three major entities making up the Federal Reserve Agency.

Merrill stated, the permission to withhold certain monetary policy directives during the month in which they are in effect violated the FIOA.

The FOMC argued it was necessary to maintain confidentiality as to the directives of the policies in effect for the security of the nation’s stability. To function as efficiently as possible it was necessary to conduct the policy without informing the public the intended result of the policy.

Case: Whether the Freedom of Information Act(FIOA) was violated by petitioner’s practice, authorized by regulation 12 CFR.

Ruling: The Burger Court ruled to hold the previously ascertained conclusion; held no opinion on the claim made by the petitioner.

Constitutionality & Private Sector Benefits

The Federal Reserve’s purpose is primarily to prevent the full scope of capitalism from taking place. The financially intrusive aspect of the organization begs the question of its constitutionality. The US citizen’s economic rights are defined in the preamble of the constitution as the right to pursue economic liberty and freedom. This inherently is not completely possible as the threat of regulation by the Fed is very real.

Another questionable aspect of the organization is its business-minded Board of Governors. Like all members who tool with policy they are subject to lobbying which unfairly pits the financial regulation towards the corporation and away form the economic benefit for the majority people it was made to do.

The Connection With the Bureaucracy

Directors & Policy Makers

The Federal Reserve’s banking system is directed by its board of governors who manage the 12 districts and legislate on their individualized monetary and policy needs.

The chairman of the FOMC is Jerome Powell. His is the face of the FED and often is the scapegoat political officials point to during times of financial uncertainty. duties reside in maintaining the public image by holding conferences and more notably when testifying before congress on the state of the economy, its outlook and the prime interest rate.

The national economy and the nation’s interest rates are manipulated for stability by the Federal Open Market Committee(FOMC).

  • The Bureaucratic Process
  • Writing Regulation
  • Testifies Before Congress
  • Enforcing Regulations
  • Issuing Fines
  • The Iron Triangle

In terms of conventionality the iron triangle for this agency often isn’t the typical setup. Monetary policy typically requires less moral support thus is met with little ethical differences. However, the funds’ use sometimes are used in a controversial way such as the Southern Border.

  • The Base
  • The Legs

Formal Cooperation Between the Congress and Judiciary

  • Congress
  • Judiciary

The FOMC is the committee which ‘decides the fate’ of the free and open market. The 7 members of the board decide on key factors which can either promote growth or decay in respect to the overall inflation of the US economy.

The President appoints the members to the board and with Senate approval they are placed among the 7.

Formal Cooperation Between the Bureaucracy & Legislative

  1. Congress
  2. Bureaucracy

The FOMC is the committee which ‘decides the fate’ of the free and open market. The 7 members of the board decide on key factors which can either promote growth or decay in respect to the overall inflation of the US economy.

The President appoints the members to the board and with Senate approval they are placed among the 7.

Though scarcely covered, economic policy is another large aspect of the role of the Federal Reserve. However, the general monetary policy made in recent years is not nearly as revolutionary as it once was, as the market system and the way it functions has not changed in over 40 years.

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Federalism Debate. (2021, Aug 08). Retrieved from https://papersowl.com/examples/federalism-debate/

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