For my term paper, I am going to answer advanced question number 17 from chapter 6 on page 198. Within a few days after the September 11, 2001, terrorist attack on the United States, the Federal Reserve reduced short-term interest rates to stimulate the U.S. economy. How might this action have affected the foreign flow of funds into the United States and affected the value of the dollar? How could such an effect on the dollar have increased the probability that the U.S. economy would strengthen? (Madura, 2011) I will briefly describe about September 11 attacks in the following paragraph.
On the morning of September 11, 2001, the Islamic terrorists group al-Qaeda hijacked four planes and crashed into the United States’ centers of power: the
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economy from a recession, and it was the lowest rate level in nearly forty years. Money was available to American consumers who were drivers to two-thirds of the U.S. economy to borrow it easily and cheaply to spend in order to stimulate the U.S. economy. (CNBC, 2014) A former Fed economist, David Jones stated, “Only the Fed can create money out of thin air in these crises when everyone panics and liquidity dries up”. According to David, It was a remarkably stable financial situation compare to how big the September 11 crisis was. (Egan, 2013) The Fed loaned more than $45 billion to many financial institutions and it provided a quick stability to the U.S. economy. The Fed’s action was a key to dampen the potential financial crisis followed by the September 11 attacks on the U.S. centers of power, and economic market stability went back close prior to September 11 by the end of September. (Federalreserveeducation.org, 2014) Then how might the Fed action have affected the foreign flow of funds into the U.S. and affected the value of the dollar?
The Fed has the power to reduce or rise interest rates may have an indirect effect on the dollars’ value, and September 11 effect was one of government indirect intervention that to respond to temporary disturbance. Low interest rates may reduce the amount of foreign flow of funds into the U.S., though it is still hard to predict foreign investors behavior because it is all depends on numbers of
The September 11 attacks were set of four terrorist attacks controlled by al-Qaeda, an Islamic terrorist group. On September 11, 2001, four aircrafts were hijacked by the terrorists; two of the planes hit Twin towers in New York, third hit the Pentagon and the fourth one crashed into a field near Shanksville, Pennsylvania (“9/11 Attacks”). The September 11 attacks had several long-term negative effects that include Social effects, Psychological effects, Physical health effects, Economic effects and many more. But of all those effects, Economic effects were the most suffered ones. The 9/11 attacks triggered the devastation of American economy (Miley). Although it has been 12 years since the episode and America has recovered a lot, American
Once FDR’s Inauguration ceremony concluded, he was faced with the damaging effects of the banking crisis that have plagued the nation’s economy. FDR was only in office for a single day when he “called Congress into a special session” because he wanted to start facing the beast head on starting with the banking crisis. The Emergency Banking Act was proposed, developed and signed in a signal day on March 9, 1933. This newly enacted law was “drawn up under pressure and passed promptly in order to facilitate the reopening of the nation’s banks“(Preston, 585). The Emergency Banking Act stated that there will be “12 Federal Reserve banks” that will be issuing additional currency to people with good assets and the banks that will be reopened will
In an instant, a single organization, with minimal government oversight, can influence entire markets and monetary supply of the country with the largest economy in the world. The United States founding fathers established a government system to distribute certain powers of the federal government to particular branches that have checks and balances in place to assure efficiency and openness among its divisions. One may assume that the organization that controls the monetary supply of an economic powerhouse of a country would have strong oversight and control over the policies they carry out. The Federal Reserve, also referred to as The Fed, has a purpose, as a central bank, to protect and control the fiscal system of the United States to create a safer lending and borrowing market for private citizens, businesses, and the federal government. Americans perceive the Fed as an extremely powerful organization. Some have asserted, including Hillary Clinton’s spokesman, Jesse Ferguson, that “The Federal Reserve is a vital institution for our economy and the well-being of our middle class” (qtd. in Shapiro 7). Unfortunately, Federal Reserve financial policies have become detrimental to the growth of the national economy and the dollar, therefore, congressional actions against the Federal Reserve Bank are a necessity to avoid continuation of instability in both US and world markets.
On the morning of September 11, 2001, an Islamic terrorist group known as al-Qaeda carried out a series of four attacks on the United States. The most well-known attack is when two commercial airline planes crashed into the Twin Towers in New York City. Many innocent lives were lost and families were torn apart. While many Americans were determined to show their resilience towards the attacks, this is a day many Americans will never forget. Although the attacks happened sixteen years ago, Americans are still dealing with the impacts these attacks have had on life in America. The 9/11 attacks have had several long-lasting effects on everyday life in America, some of which include an increase in airport security, a change in national security, and an increase the fear of terrorism.
All day and all night, they battled the emergency with each instrument available to them to keep the United States and world economies above water. Working with two U.S. presidents, and under flame from a crabby Congress and an open angered by conduct on Wall Street, the Fed—nearby associates in the Treasury Department—effectively settled a wavering monetary framework. With inventiveness and definitiveness, they kept a financial fall of incomprehensible scale and went ahead to create the strange projects that would resuscitate the U.S. economy and turn into the model for different nations. Rich with detail of the basic leadership prepare in Washington and permanent representations of the real players, The Courage to Act relates and clarifies the most exceedingly bad budgetary emergency and monetary droop in America since the Great Depression, giving an insider 's record of the approach reaction (http://www.forbes.com/sites/richardsalsman/2012/03/06/five-financial-reforms-that-would-prevent-crises-and-promote-prosperity/#).
On September 11, 2001 one of the world’s most tragic terrorist attacks happened to the United States; Terrorist’s hijacked four planes and crashed two of them into the World trade center located in New York city the third plane crashed into the pentagon and the last one was crashed somewhere in Pennsylvania on a field. Many lives were taken away that day; because of this tragic attack different sparks of questions and conversations raised to the surface, mostly bad. There were many questions that involved America’s security, such as our airports, the amount of tourism we had, and immigration we allowed in. People even sparked questions related to the government, such as, “Should we trust our government?” and “Was this a set-up?” Once questions about the government entered the air, American citizens started to think, if they should trust other countries into our state. I believe this topic can be very controversial because of the different ways you can look at this tragedy. I believe the United States of America was affected in so many ways and in all the research I have done my goal is to inform you on the many different ways September the 11th affected America’s security, our government and the American View.
On September eleventh, 2001, the most prolific terrorist attack of modern history took place on American soil. The discussion about 9/11 consistently revolves around its direct impact on American lives and the military response from the United States. The destruction from the attacks consumes the majority of information taught to students and citizens across American; however, the effects of 9/11 go much further. Economies across the world felt the impact following the terrorist attacks on the World Trade Centers, an impact that can still be felt today. If the Twin Towers still stood today, we would be living with a completely different economy.
The events of 9/11 further set back an already fragile economy (Figure 2). It heightened uncertainty, shaken confidence, and caused a widespread pullback from economic activity. Equity prices fell sharply for several weeks and credit risk spreads widened. The main focus of the Federal Reserve in the first few days following the attacks was to reinstate the infrastructure of financial markets and to provide massive quantities of liquidity to the functioning of those markets. The enhanced economic fallout from the events of 9/11 led the Federal Open Market Committee (FOMC) to cut the target federal funds rate through the end of the year. (Federal Reserve Board, 2002)
The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’
On September 11, 2001, a catastrophic event occurred in New York City (‘’9/11 attacks”). The nineteen Islamic terrorists from Saudi Arabia hijacked four airliners. The Twin Towers of the World Trade Center in New York City and part of the Pentagon in Washington, D.C was destroyed (“9/11 attacks”). These terrorist attacks caused approximately 3000 deaths, and it also impacted how the United States handled terrorism and airport security (“9/11 attacks”).
On September 11 2001, an attack was made on United States. Four systematic terrorist attacks were pulled off by the group al-Qaeda simultaneously bringing down the World Trade Centre in New York and damaging the Pentagon in Washington D.C. As extensive and in depth as the cause for the attack may have been, September 11 is an event that has undoubtedly left its mark in American history. A turning point, as some would call it, of the political, social, and economic systems of the United States. Quickly following the terrorist attack on 9/11, President George W. Bush called for a “war against terrorism.” Instead, what truly occurred was an act of counter terrorism. After 9/11, the political system of America took a turn for the worst;
During the financial crisis, the Fed’s monetary policy and the Treasury’s fiscal policy were both expansionary and thus essentially complementary to each other. Both policies aimed at stimulating the economic activities and stabilizing the credit market and the entire financial system. During the crisis, the inflation rate dropped significantly as the commodity prices plummeted, which freed the Fed from worrying about inflation risk. The foreign investors poured their money into the U.S. Treasury, allowing the U.S. government to borrow at extremely low interest rates. The various actions taken by the Treasury and the Fed served to work together to address the problems which were critical to save the U.S. financial system from collapse and to end the most severe recession since the Great Depression.
The September 11th attacks have had a profound effect on American history. Often referred to as “9/11”, these attacks were comprised of a group of organized terrorists known as Al-Qaeda. This extreme Islamic group assaulted several landmarks in New York City, Washington D.C, and the state of Pennsylvania. In New York City, two airliner jets were hijacked with passengers aboard and slammed into the World Trade Center. “The next attack resulted in a plane colliding into the Pentagon, government building; the last attack was in Pennsylvania when a plane crashed into a field. In total, 3,000 people died on September 11th, 2001” (History.com Staff). The September 11th-attacks have affected airport security by the new training of flight attendants, the formation of the Transportation Security Administration and new technical advances to keep up with increased terror threats.
As interest rates bottomed out quickly after the onset of the recession, the Federal Reserve could no longer stimulate the economy with traditional and time-tested techniques. The controversial and unconventional method chosen by the Federal Reserve, and other central banks around the world, is known as “quantitative easing” (QE). QE functions by injecting large amounts of reserve capital into commercial banks with the hope that those banks will then be willing to lend the money at affordable interest rates. Ideally, the addition to economic activity affected by the influx of capital to banks should keep the value of the dollar relatively low, avoiding deflation and encouraging foreign investment by those wishing to take advantage of an affordable dollar. The cheaper dollar should also make American exports look more attractive to potential consumers in other countries. If interest rates stay low, and banks begin lending again, consumer and investor confidence should hopefully rise, leading to more spending and thus, economic growth.
The Federal Reserve as well contributed to this crisis through some of the policies that it instituted. Between the year 2003 and 2004, this institution lowered the rate of the federal funds from the initial 6.5 per cent to just 1.0 per cent (Jane, 2011). This move was aimed at addressing the effects that were associated with the terrorist attacks that took place in September of 2001. These measures were also meant to soften the negative effects that were occasioned by the collapsed dot com bubble. At this time also, there was a perceived risk that the United States could suffer from deflation. These measures were therefore aimed to combat this risk of deflation. These measures increased credit uptake but the expected results were not realized. To address the said problems, it was expected that the money borrowed would be invested in business.