The Federal Reserve System of the usa
The Federal Reserve System of the USA or “Fed”, as it is known in financial circles, is an independent agency of Congress founded in 1913. The system consists of twelve federal reserve banks and a board of governors. The board of governors has its headquarters in Washington, D.C.
The Fed performs three major functions. It provides services to the banking system and federal government; it stabilizes the banking system; and it controls the quantity of money in circulation.
The most important service of the Fed is check clearing, i.e. making sure that checks written on one bank can be accepted at any other bank in the country.
The Fed performs a number of other services for banks and thrift institutions. It provides currency to banks and collects worn currency. It also provides safekeeping for securities.
Finally, the Fed performs banking services for the federal and foreign governments. It maintains US Treasury accounts from which all federal government payments are made. In addition, it assists in international transfers of funds by private firms and international agencies.
A second function of the Federal Reserve is stabilizing the banking system.
The Fed was also given the power to supply extra reserves when needed. There are two ways in which the Fed can put reserves into the banking system. First, it can lend reserves to banks. Second, it can supply reserves to the banking system by buying government bonds from the public on the open market, in other words, by participating in open-market operations.
Fed has taken on another role as well, than of partner, with Congress and the executive branch, in the making of economic policy. The Fed’s power as an economic policymaker comes from its ability to control bank reserves and, hence, to control the total amount of money in circulation.
International monetary system
There is little exaggeration in saying that international monetary developments affect all individuals as workers, consumers, travelers, businessmen producing goods for domestic or foreign markets, and investors at home or abroad. The channels which transmit the impact of monetary events to people in their various roles in society are numerous.
Business activity is heavily influenced by international monetary conditions affecting prices, exchange rates, interest rates, imposition of controls on exports or imports or on capital movements.
The international monetary system is a set of arrangements, rules, practices, and institutions under which payments are made and received for transactions carried out across national boundaries. The international system is concerned not only with the supply of international money but with the relationships among the hundred or so currencies of individual countries and with the pattern of balance-of-payments relationships and the manner in which they are adjusted and settled.
International monetary relations are governed by rules of the Articles of Agreement of the International Monetary Fund1 and also by agreements and consultations among nations through other international institutions.
The international monetary system is afflicted with problems. The main reason is that the nations that participate in it are politically independent but economically and financially interdependent.This discrepancy determines the functions of the international monetary system; at its best, the system acts to reconcile the conflicting economic policies of its politically independent members.
In broad terms, the international monetary system involves the management, in one way or another, of three processes:
the adjustment of balance-of-payments positions, including the establishments and alteration of exchange rates.
the financing of payments imbalances among countries by the use of credit or reserves;
the provision of international money.