Scot Wick Blog

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 10 Money and Prices in the Long Run Chapter 29 of 36 The Monetary System Section 9 of 22 ... The U.S. economy, as do all major countries, uses a fiat money system. Dollars are money because the U.S. government declares it is, by fiat. Fiat money has no intrinsic value as does gold. Whenever an economy uses a fiat money system some agency must regulate the monetary system. In the U.S. that agency is the Federal Reserve. … The Federal Reserve (the Fed) is a central bank, an institution that oversees the banking system including regulating the economy’s quantity of money. Other major worldwide central banks include the Bank of England, the Bank of Japan, and the European Central Bank. The Federal Reserve was created in 1913 after bank failures in 1907. Government policymakers were convinced the U.S. needed a central bank to ensure the health of its banking system. … Today, the Fed is run by its Federal Res...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 10 Money and Prices in the Long Run Chapter 29 of 36 The Monetary System Section 8 of 22 … One puzzle about the U.S. economy money stock concerns the amount of currency. In 2007 the currency in circulation was $759 billion. To put this number in perspective divide $759 billion by 232 million, the number of adults in the United States. This equals $3272 per adult. This is a surprising number, people don’t normally have this much cash in their possession. Where is all this currency? There are two likely explanations, it is · held in foreign countries where people often prefer U.S. dollars to their domestic currency · held by criminals such as drug dealers and tax evaders … For most people in the U.S. economy, currency is not a good way to hold wealth. Currency is held only in small amounts because it · can be easily lost or stolen · does not earn interest as does a bank deposit Criminals avoid putting the...