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Objective
During
the recent Great Recession, U.S. Federal Reserve Board Chairman Ben Bernanke
applied lessons learned from the Great Depression of the 1930s in which
government policies failed to bring the U.S. and the world out of an epic
economic slump.Under Bernanke’s leadership, the Federal
Reserve acted aggressively to stem the downturn that began in the summer of
2008. The objective of this written assignment is to gain a greater
understanding of the central bank’s role in managing the economy and,
specifically, the actions taken by the U.S. Federal Reserve System to combat
the Great Recession.
Directions
Summarize
the increasingly aggressive steps the Federal Reserve employed beginning in the
summer of 2008 to increase liquidity in the U.S. economy. The deliverables
should cover the following points:
1.
Circumstances that prompted
intervention,
2.
Actions taken,
3.
Objective and economic rationale,
4.
Process including how the Fed paid for
the financial assets it purchased, and
5.
Effect on the monetary base, money
supply and interest rates.
Include
graphic illustrations of the monetary base, M2 money supply and short term
interest rates over a suitable period of time to provide a visual historical
perspective. Conclude with a short analysis of the Fed’s actions. Given the
tools available at the time, was the Fed successful in meeting its objectives?
Finally, discuss the possible dangers that lie ahead in the wake of the Fed’s
actions since 2008 and recommend how it might gradually reduce its heightened
intervention in the U.S. economy.
Thousands
of articles and commentary have been published on the Fed’s response to the
Great Recession. While you are welcome to use any resource, your primary source
should be the Fed’s own statements. Short monetary policy statements are
published after each meeting of the Federal Open Market Committee. Other
important statements were published as joint statements with other Federal
agencies.
