It may surprise you to know that the banking sector is one of the most regulated industries in the United States with a bank having to file regulatory documents with several agencies.
The US financial system is extremely complicated and this series shades light only on some corners of that system by focusing on the banking sector.
Given that the concept of leverage will be used often in the upcoming posts, this post spends some time explaining what leverage is and some of its impacts on the balance sheet of any economic unit.
The post studies how the Fed is involved in fiscal operations and how the U.S. Treasury is involved in monetary-policy operations. The extensive interaction between these two branches of the U.S. government is necessary for fiscal and monetary policies to work properly.
This post answers some FAQs about monetary policy and central banking. Each of them can be read independently.
While details in operating procedures have changed through time, the federal funds rate has progressively gained in importance as a relevant operating tool since the 1920s.
Now that we have an understanding of how the balance sheet of the Fed works, it is possible to go into the details of how the Fed operates in the economy in terms of monetary policy.
Part 1 reviewed basic balance-sheet mechanics. This post begins to apply them to the Federal Reserve System (Fed).
The core of the financial system consists of financial documents and among them are balance sheets. As Hyman P. Minsky used to note, if you cannot put your reasoning in terms of a balance sheet there is a problem in your logic.