(Macro) Episode 32: Monetary Policy

This video gives a brief overview of the Fed's three monetary policy tools: Open Market Operations, the Required Reserve Ratio, and the Discount Rate.

Category:

Education

Tags:

• economics
• Fed
• monetary
• policy
• discount_rate
• OMO
• OMOs
• required_reserve_ratio
• required_reserves
• expansionary
• contractionary

[mjmfoodie]

Like any other commodity, if you increase the supply, he value fall; if you decrease the supply, the value rises...

[Soldier957]

Hi. I cann't find your episode on money creation on your channel. What's the name of that video?

[mjmfoodie]

@Soldier957 "Episode 30: Creating Money"....

[mjmfoodie]

TOO LATE!! I should have checked my email earlier! Theoretically, you are correct; if no one wanted to "lay ball," so to speak, OMOs wouldn't work. But the reality seems to be that there is always someone willing to buy & sell.

[3lnenetravieso09]

I don't get how to OMO works to fix high levels of inflation or trying to fix an recession. :(

[mjmfoodie]

@3lnenetravieso09 1 sec ago

Well, they are two different things:

1) fixing high levels of inflation means we would slow things down, or take money OUT of the economy - this is done when the Fed sells securities. The Fed ends up with the cash, the economy ends up with the securities.

2) Trying to fix a recession means we would speed things up, or put money INTO the economy - this is done when the Fed buys securities. The Fed ends up with the securities, the economy ends up with the cash.

[Romeodxb]

I love your videos, its simple, precise and to the point.

[itempus]

THANKS SO MUCH! :D

[bladewolf390]

how does Expansionary and Contractionary monetary policy affect the exchange rate in a country... 

[bladewolf390]

@cinqueottavi then the gov't will search for another buyer... and its not only banks gov't sell to also corporation...

[billybob7757]

0:01

[cinqueottavi]

What's happen if BANK 1 in the case of "OMO selling" doesn't want to by from FED the bonds/security?

[Musicfreaklolduh]

These are going to save me in Ap econ thank you sooo much ! You talk very fast though

[kenwkto]

very good explanations thanks!

[ChulaKirby]

The Federal Reserve does not decrease it's holdings of cash to buy the treasuires. It's brings up Wells Fargo Reserve account and electronically punches in $1,000,000.00. Another way of saying it, they created the money with some key strokes on a computer. How much can they create? How how does the number system go? infinite? So they did not decrease their holdings of cash. They created the money from thin air or as Bernanke says "electronic printing press".