Fast Cash Loans Site, inc

Nevertheless, monetary and credit policies are two different things. Monetary policy consists of changes in the monetary base--the sum of outstanding currency and bank reserves. Credit policy, in contrast, changes the Fed's assets while holding the amount of the monetary base fixed--sterilized lending is an example. Monetary policy aims at keeping the price level stable and relatively predictable, and by doing so, contribute to maximum sustainable economic growth. Credit policy is also aimed at promoting growth, but it is a form of fiscal policy in that it uses the public sector's balance sheet to alter the allocation of resources. As I said. Fed Reserve lending has been financed to a large degree recently by increases in the monetary base, but that lending could just as well be performed by the U.S. Treasury and financed by the issue of Treasury securities. (4) No immediate change in the assets and liabilities of the public would be required, as the additional amount of debt that the Treasury issued would exactly match the additional need for assets by the Fed Reserve Banks if the monetary base were to remain unchanged.

However, there is one significant difference between lending performed by the U.S. Treasury and lending performed by the Fed Reserve Banks. The Treasury can lend only under explicit authorization from the Congress. The Fed Reserve, in contrast, has independent control of its balance sheet and funds itself outside of the normal appropriations process. That independence was affirmed in the 1951 Fed-Treasury Accord, which freed the Fed from an obligation to suppress interest rates for the purpose of limiting the cost of public debt. (5) Central bank independence is now widely recognized as an important mechanism for insulating monetary policymaking from inflationary political pressures, and allowing it to respond quickly to short-run macro-economic developments.