Article: http://www.vancouversun.com/business/fp/Central+bank+right+hold+monetary+policy+reserve/1533427/story.html
Summary:
Central banks are not in any hurry into “printing money” which is also referred to as quantitative easing. Central banks are trying to encourage financial institutions that large payments will be established and will increase the supply of credit towards households and businesses. According to the monetary policy report, central banks are increasing the overnight rate which had been reduced by 425 basis points since December 2007. Central bank has the right to wait for monetary policy to take action because as of now it is unclear if there is any impact. If there is anything that could bring recession to an end, it would be spending, investing, lending and borrowing. Those, however, haven’t been seen much recently.
Connections:
The main connection this article and the chapter have in common is monetary policy. It is a process taken in which the government, central bank or any monetary authority has control of a country’s money supply. According to the article, the monetary policy has been approved that the rate will reach a new limit of effectiveness, which was previously reduced by 425 basis points. The supply of money will be altered by the changing interest rates, and the economic condition is the rate of inflation.
Reflections:
I think it is very important for the Bank of Canada to maintain control over the country’s money supply. It is a necessary step for the government in order for the country to build and grow. If there are no changes, the country will only remain the same state as it is. People tend to save money instead of spend as much during the recession times but the inflation rate will only continue to increase. However, in order to stop recession, people would have to spend, invest, lend, and borrow again. Even if economic problem is affecting countries around the world, Canadian Central Bank is trying to prevent any further problems as it continue to try and fix this economic problem.
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I agree with you that it is very important for the Bank of Canada to have control of the country's money supply. Since we have learned that the amount of money in circulation influences the levels of unemployment, inflation, and economic growth, four very important factors in our economy, it is safe to say I am confident that the Bank of Canada is in charge of the money supply. To get us out of the recession that we are in currently, it is a smart idea for consumers to start spending, investing, lending, and borrowing again. When money circulates in our economy, it stimulates more spending. When people start doing any of the four things mentioned, our economy’s GDP would increase and hopefully this will get us out of recession.
K. Li
Block F
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