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  • Essay / Complexities of the American Financial System - 662

    Complexities of the American Financial SystemThe American financial markets play an important role in the economy. If no one invests in businesses, they cannot start or grow to meet the needs of the country or nation. The economy is directly impacted by the amount of stocks bought and sold each day. Before the U.S. stock market collapsed in 1929, it was booming. Americans had invested so much money in France that when their economy grew, so did the United States. They collapsed because the Americans took their money out of France and put it into American stocks. If everyone withdrew their investments today, the same thing would happen. Businesses would go bankrupt and the United States would go deeper into debt. The central bank of the United States is the Federal Reserve which controls the financial system and is the most powerful player in the American economy. The head of the central banking system of the United States is called the chairman of the Federal Reserve. The president is appointed by the President of the United States and serves a four-year term with Senate confirmation. Ben Bernanke is currently in office. The Board of Governors of the Federal Reserve System has a total of seven members, including the chairman. With the exception of the president, members serve a staggered term of fourteen years. The Board of Governors of the Federal Reserve is responsible for monetary policy and serves as a dependent policy structure. Although it is a dependent and autonomously functioning political structure, disagreements between the administration and the board of directors are very frequent. Pressure from Congress and/or the President can and has influenced the board's decision, but its semi-independence generally prevails. The Board of Governors of the Federal Reserve "operates through the Federal Open Market C...... middle of paper ... and makes adjustments to keep it in line with true market value." Operating in foreign markets follows a checklist and monitoring that market's exchange rate is a contributing factor. The United States financial market impacts many levels of the economy, businesses, and individuals. As you can see, it's like a pyramid. Businesses and individuals are affected by the economy and its situation within the market. ReferencesInvestopediacom 20110906 How Interest Rates Affect US MarketsInvestopedia.com (September 6, 2011). How Interest Rates Affect US Markets. Retrieved May 1, 2013, from http://www.investopedia.com/articles/stocks/09/how-interest-rates-affect-markets.aspMelicher RW Norton EA 2011 Introduction to FinanceMelicher, RW and Norton, EA (2011). Introduction to Finance (Fourteenth ed.). Hoboken, New Jersey: John Wiley & Sons, Inc...