Monetary Control Act Of 1980 Analysis

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An expansionary policy Act signed during the 80’s that is still in place today is the Monetary Control Act of 1980. This Act consisted of 2 parts, which also includes the Depositary Institution Deregulation of 1980. Prior to the approval of this act, only the banks associated with the Federal Reserve were mandated to report deposits from the public and had a regulated interest rate, which placed them at a huge disadvantage due to the fact that the public was opting towards mutual funds in order to increase savings. As mentioned in the World Public Library (2016), the approval of this Act allowed for all the banks in the nation to report deposits, to charge any interest for loans and increased the deposit insurance from $40,000 to $100,000. …show more content…
The Gramm-Leach-Bliley Act of 1999 mandated that financial institutions needed to notify their members of any personally identifiable information practices that they incurred in. This was mostly due to banks sharing members’ financial and private information to other companies which proceeded to charge them for services they hadn’t subscribed to or began telemarketing harassment towards uninterested members’.
Alan Greenspan was the Chairman of the Fed from 1987-2006. He was the main ambassador of any new monetary policy. During this time frame he went through 2 short recessions, for which he acted quickly in order to return the economy to a stable phase. His monetary policies consisted of immediately increasing interest rates by a higher percentage than the inflation rate. This created the fear that unemployment would immediately rise because according to the Phillips Curve and the Non-Accelerating Rate of Unemployment (NAIRU) theory, high interest rates and low unemployment don’t go together because high employment is prove to accelerate inflation. In the previously submitted module, we discussed how during the 90’s unemployment and inflation were low, but interest rates were rather high, thus contradicting the Phillips
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After the 1991 recession, growth and interest rates were rather equivalent ,and during some years the growth surpassed the interest rates due to the low unemployment, once again contradicting the NAIRU and Phillips Curve. During the 1990’s not only was employment, demand and productivity high, but the dollar was the currency of highest value worldwide. In figure 2, we can better see this monetary exchange value by comparing the two most powerful currencies in the world, the euro and the dollar. This was possible by the market crash of Mexico and China, and domestic and international investments in the American stock market. “The US stock market bubble during the 1990s sucked in billions of dollars in foreign investments, as foreign companies and individuals hoped to ride rising stock prices to riches.” (Quenemoen, M. & Paul. J

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