Complexities of the U. s financial system Assignment

Complexities of the U. s monetary formation - Assignment ExampleEfficiently operating fiscal markets play a part in the health of the economy (Fabozzi, Modigliani & Ferri, 1994). Economic growth is underpinned by financial market development. Financial markets guide the flow of individual and business nest egg and investments, within the economy to improve the buildup of capital and enhance effective production of products and services. The price of returns on investments and conviction plays a part in signaling financial market participants such as consumers and producers to channel funds, particularly from businesses and households to investors, governings, consumers and businesses. Financial markets link those who need the funds with willing lenders (Demirguc-Kunt & Ross, 2001). Strong financial markets and institutions and a wide roam of financial instruments and products, meets the needs of both lenders and borrowers, therefore, the entire economy. Moreover, strong financi al markets enhance the flow of funds among countries, thereby enhancing the economies. Additionally, financial markets also reduce transaction and await costs within the economy. Through the provision of a wide array of financial products with differing pricing and risk structures and maturities, financial systems provide products to participants, which offer borrowers and lenders with close matches for their needs. Persons, businesses, as well as governments that need funds can effortlessly discover which financial markets or institutions offer funding and the costs imposed on the borrower (Pryor, 1996). This enables investors to canvas financing costs to their anticipated returns on investment hence making the most effective investment choices suited to their needs. Therefore, financial markets influence the allocation of credit within the economy, facilitating production of products and services. The key rationale for creating the federal Reserve was to deal with banking panic s. Other roles are provided in the Federal Reserve Act. The Federal Reserve furnishes an tractile currency, allowing for the rediscounting of commercial paper and establishes an effective supervision system of banking in the US. The Chairman of the Federal Reserve serves as the head of the countrys central banking system and is the executive officer of the Federal Reserves Board of Governors (Demirguc-Kunt & Ross, 2001). Conversely, the Federal Reserve Board, conducts the countrys monetary policy, supervises and standardizes banking institutions and protects consumers credit rights. The Board also ensures the financial systems stability and offers financial services to the government, official foreign institutions and the public. Today, the Federal Reserve serves as the countrys central bank, striking a balance between the governments role as a centralized institution and banks private affairs. It also monitors and regulates banking institutions and protects consumers rights. Thro ugh a monetary policy, the Federal Reserve manages the countrys money supply in order to attain stable prices by deterring deflation and inflation, maximum employment and minimal long-term interest rates. Moreover, the Federal Reserve maintains the US financial systems stability and acts as a banker and lender of last resort to commercial banks and the US government (Pryor, 1996). The reserve