Capstone 2015: The Federal Reserve

Posted by Rebecca Moore - 21 May, 2015

IMG_1750wBy Will Hassell '15

I have always had a passion for economics and finance. I started investing in 2008, after the crash, when I was in 7th grade. I love investigating the causes and effects. I knew that I would do my Capstone project on the creation of the Federal Reserve in 1913.

This hybrid public/private institution began at a time where people were questioning the Classical Model in favor of Keynesian economics. The financial system was a Wild West where bankers could do anything. In the 1920s, there was credit bubble, where all sorts of people—housewives, people with not that much money-- were borrowing cheap money to buy consumer goods, houses and stocks. There was a massive credit boom. Cruise ships even had brokerage houses on board so that people could check their investments. In 1928, the Fed raised interest rates from 2.5 to 8 percent. People freaked. Stocks lost 25 percent of their value in three days, there were bank runs and mortgage defaults. The modern day Fed still functions with many of the same characteristics although they make more incremental rate changes. They keep rates low, but monetary policy is a double-edged sword. The Fed saves the U.S. from one catastrophe, but creates the next. They can’t keep interest rates low forever, at some point it is going to cost us. I’d like for there to be less government oversight because it become politicized.

I think there should be finance courses in schools. People think the bank’s responsibility is to tell them what they need to know, but they don’t read the fine print or realize that interest rates will change. I hope my presentation helped people to understand why the Fed exists and how much control it has. I hope they will educate themselves about how it affects everything: mortgage rates, bank interest, consumer debt.

You can follow Will on Twitter, @willhassellws.

Topics: 12th grade, Academics, Capstone, economics, #rgrads, People

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