The Fed And Interest Rates Essays (1094 words) - Monetary Policy

The Fed and Interest Rates Dave Pettit of The Wall Street Journal writes a daily column that appears inside the first page of the journal's Money & Investment section. If the headlines of Mr. Pettit's daily column are any accurate record of economic concerns and current issues in the business world, the late weeks of March and the early weeks of April in 1994 were intensely concerned with interest rates. To quote, "Industrials Edge Up 4.32 Points Amid Caution on Interest Rates," and "Industrials Track On 13.53 Points Despite Interest-Rate Concerns." Why such a concern with interest rates? A week before, in the last week of March, the Fed had pushed up the short-term rates. This being the first increase in almost five years, it caused quite a stir. When the Fed decides the economy is growing at too quick a pace, or inflation is getting out of hand, it can take actions to slow spending and decrease the money supply. This corresponding with the money equation MV = PY, by lowering both M and V, P and Y can stabilize if they are increasing too rapidly. The Fed does this by selling securities on the open market. This, in turn, reduces bank's reserves and forces the interest rate to rise so the banks can afford to make loans. People seeing these rises in rates will tend to sell their low interest assets, in order to acquire additional money, they tend move toward higher yielding accounts, also further increasing the rate. Soon this small change by the Fed affects all aspects of business, from the price level to interest rates on credit cards. Rises and falls in the interest rate can reflect many changes in an economy. When the economy is in a recession and needs a type of stimulus package, the Fed may attempt to decrease the interest rates to encourage growth and spending in the markets. This was the case from 1989 until last month, during which the nation's economy was generally considered to be in a slight to moderate recession. During this period the Fed tried to keep interest rates low to facilitate growth and spending in hard times. However, when inflation is increasing too quickly and the economy is gaining strength, the Fed will attempt to raise rates, as it did late last March. This can be considered a sign that we are pulling out of the recession, or atleast it seems the Fed feels the recession of the early nineties is ending. Directly after the Fed's actions, the stock market was a mess. The Dow took huge dips, falling as much as 50 points a day. Although no one knows exactly what influences the market, the increase in interest rates played a major role in this craziness. Mr. Pettit's column on March 25th highlights, "Industrials Slide 48.37," Mr. Pettit attributes a large portion of the market's "tailspin" at this time to, "Rising interest rates at home." It is certainly no coincidence that these two events happened at the same time. Alan Greenspan, the current chairman of the Fed comes under great attack and praise with every move the Fed makes. He is, in a sense, the embodiment of the Fed. He has been in charge of the Fed since 1987. Some economists blame him for the recession of the early nineties. His influence on the interest rates as chairman of the Fed is monumental. It is his combined job as the Fed to steer the economy in a balanced manner that does not yield too much to inflation and to keep growth steady. Predictably, most economists are back seat drivers when it comes to watching the actions of Allen Greenspan, and they tend to feel they could much more successfully manage the economy than he. Many also agree with his tactics, so it is a two way street on which the chairman is forced to drive. It seems that not only the analysts are in disagreement of how the fed should operate, but interestingly enough, the internal policy makers seem to also disagree on what stance the Fed should take. Some of the internal policy makers are interested in making a more substantial increase now, while others opt for a more conservative approach, where the market can be tested for both good and bad influences from the rate increases. Allen Greenspan is one of this more conservative group, and it is he is critisized by some for the irradic behavior in the stock market as of late. The equilibrium that the Fed

Police, Policy, and Politics

Police, Policy, and Politics Police, Policy, and Politics Police, Policy, and Politics By Mark Nichol Are police and policy related? Not only are they cognates, but they used to mean the same thing- and politics is descended from the same word as well. That word is polis, the Greek term for a city as well as for the concept of the city-state and the body of citizens who constituted that state. This word became the basis for a number of compounds, including acropolis, which means â€Å"upper city† but refers to the fortified heights of a city. (The prefix acro- is also seen in such words as acrobat, which literally means â€Å"high dancer,† and acrophobia, which pertains to a fear of heights.) Acropoles in ancient Greece were generally located the first inhabited part of a settlement (chosen for its defensive properties and therefore the location of the community’s citadel); the Acropolis of Athens is the exemplar of such locations. Another term is metropolis (literally, â€Å"mother city†), originally denoting the capital or principal city of a province but now used to describe any major city. The adjective metropolitan describes the characteristics of a city, often including its underground railway system, which is sometimes abbreviated to metro, but the word also serves as a noun for a Greek Orthodox bishop who oversees other bishops and for the see, or seat, of his administration. Megalopolis, featuring the prefix mega-, meaning â€Å"great,† is the name of an actual city in Greece but also refers generically to an especially large city or a cluster of cities- technically, one with more than ten million people. (A related adjective is cosmopolitan, which stems from the noun cosmopolite, a rare term meaning â€Å"citizen of the word†; the equally unusual word cosmopolis describes a sophisticated city. Meanwhile, a necropolis- the prefix means â€Å"dead†- is a large cemetery.) Greek names for other ancient cities, such as Constantinople/Istanbul (â€Å"Constantine’s city†/â€Å"to the city†) and Persepolis (â€Å"city of the Persians†), include the word; several modern cities, including the American municipalities of Annapolis, Indianapolis, and Minneapolis, follow this tradition. Originally, police, like policy, referred to civil administration (both come from the intermediate Latin noun politia), but by the early 1700s, it came to apply specifically to law enforcement, and within about a century that was its only sense. Enforcers soon came to be called police, as well as policemen (later, policewomen was adopted for female officers, and the neutral term â€Å"police officer† now prevails for all personnel), and the word also became a verb describing the action of law enforcement or the keeping of order in general. (Later, policier came to describe a novel, film, or television program dealing with the solving of crimes.) The two meanings of policy apparently come from different sources. The sense of â€Å"approach† or â€Å"way of management† derives from polis, but the word for an insurance contract may stem from the Latin word apodexis, meaning â€Å"proof.† However, politics, politician, and other such words pertaining to public affairs also derive from polis. An interesting divergence occurred with political and politic, which both originated as adjectives meaning â€Å"pertaining to public affairs†; the latter word acquired the additional sense of â€Å"prudent† and rarely applies to politics anymore, though the verb form, and the noun form politicking, do. (The k was added to the latter word, as it is to picnicking and a few other words, to clarify that the consonant sound before -ing is hard.) Polite and its derivatives impolite and politesse are unrelated, stemming not from polis but from polire, a Latin verb meaning â€Å"polish† (and the source of polish as well) or â€Å"smooth.† Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Vocabulary category, check our popular posts, or choose a related post below:100 Idioms About Numbers"Owing to" vs "Due to"Careful with Words Used as Noun and Verb