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BY SUNDAY, 11:59 PM:

Return to this discussion thread, read the ideas that have been shared, and offer substantive feedback to at least two of your peers. Do you like their ideas? Do you feel they are headed in the right direction? What specific ideas and suggestions can you offer to help enhance or compliment their efforts and vision for this project?

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discussion  thread one;

1)

   Having a global centralized bank will have its pros and cons. Something positive from having a centralized global bank is that fiscal policy will be centralized. This system will be less influenced by politics because the board of directors would be appointed by presidents or prime ministers and the board members terms would have single twelve-year terms like the United States

 The cons associated with a global centralized bank is that each countries policies are going to follow their own agendas even at the expense of other countries. They can enact fiscal policy that benefits employment numbers over fiscal policy. Conflicts over fiscal policy can escalate to a violent end but the same argument can be true for having opposing competing currencies.

2)

   When we decrease the federal reserve ration we tighten the economy to reduce inflation rates. This means rate of growth of the supply of money is being reduced.

DeltaS *M = $100million

DeltaS * 1/r = $100million

DeltaS * 1/0.05 = $100million

Delta S = $100million * 0.05 = $5million

3)

   Sometimes the fallout from institutions failures spill over to many innocent bystanders. When the economy is in a recession, everyone is hurting. I do not support a blank check system to any institution that is too big to fail. If the government needs to intervene to minimize damage to the economy, they should. But this should not be done in a way to incentivize big banks to make risky or reckless lending practices only to fail again. During the Sub-prim crisis, the big banks should have filed for bankruptcy. That is when the government could step in to split up the institutions to compete against each other in the free market. This should be done in a way that is transparent to not promote fear or panic in financial markets.

discussion  thread two;

1. There would be many Pro’s and Con’s coming from one Global Central Bank. All nations would benefit since there would no longer be currency risk in international trade. However, the biggest downfall of a global currency would be the loss of independent monetary policy to regulate national economies. This would result in developed nations being negatively impacted rather than developing nations. Therefore, I would say no on the one Global Central Bank due to the reasons above.


2. An increase in the reserve requirement ratio reduces the proportion of deposited funds that a financial institution can lend out. Meaning it will reduce the rate at which money can multiply. The maximum money supply released $100,000,000 x 1/.05 = 2 billion dollars.


3. I don’t see the point in rescuing large financial organizations as it can lead to a much bigger problem and ultimately add more debt onto the Fed.