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The Role America's Federal Reserve Played in Contributing to the Actions Leading to the 2008 Financial Crises - Essay Example
Pages 10 (2510 words)
The role America's Federal Reserve Played in Contributing to the Actions Leading to the 2008 Financial Crises Introduction The Federal Reserve of the United States was established in 1913 as a means of stabilizing currency issues within the country. Since its emergence the Fed has prominently functioned in response to the major crises of the 20th and 21st centuries…
While the Federal Reserve is a cornerstone institution of the United States, critics have argued that in the long-term the Fed is actually bad for the economy. This research evaluates the extent that the Federal Reserve contributed to the actions leading to the 2008 financial crises. Analysis One of the most prominent critics of the Federal Reserve has been former Republican Presidential candidate Ron Paul. Paul’s perspective follows a line of logic that is directly related to the way the Fed functions. Paul indicates that when the American economy is lagging the Federal Reserve infuses new currency into the system. This new currency results in lowered interest rates. The lowered interest rates correspondingly result in capitalist expansion, as business and individuals increasingly engage in borrowing practices. The problem, as Paul indicates, is that such practices are artificial and don’t reflect the economies’ true and proper functioning. Paul has seminally noted, “When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster” (Paul 2011). ...
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