Behind Our Economy There Is an Organization with the Power of Manipulation

Behind our economy there is an organization with the power of manipulation: The Federal Reserve System. The institution was founded in 1913 in order to maintain such monetary and financial system that provides safety and stability to its nation and citizens.

In summary the Federal Reserve has three prime responsibilities: Monetary Policy, Banking Supervision and Financial Services (Federal Reserve, 2018).

The function of Monetary Policy has a role of managing the overall demand - to sustain fluctuations in the economy. The policy indicates the chosen course how the central bank utilizes the money supply to induce price stability by influencing interest rates (Labonte, 2018). The important question is how the Federal Reserve carries out Monetary Policy? As I mentioned, the policy has its absolute power to dominate money supply and credit conditions comprehensively. "The Fed defines monetary policy as the actions it undertakes to influence the availability and cost of money and credit to promote the goals mandated by Congress, a stable price level and maximum sustainable employment" (Labonte, 2018). 

Please see chart and table below presenting the United States Fed Funds Rate from the year of 2014 to our present days. The current interest rate is 2.25 %. A gradually increasing interest rate can be observed.

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Let’s see what is behind the rising rates. During the time of the financial crisis in 2008, the rates were lowered down near to zero. The reason of that business maneuver was to motivate lending and stimulate the economy. Then in 2015, the rates began to increase, since the economy did not seem to require that much of direct assistance. To avoid inflation in our growing economy – as we can see - the Feds is increasing the base interest rate gradually to facilitate decrease in the money supply.

What is Fiscal Policy? Fiscal Policy means “changes in the structural budget deficit” (Labonte, 2018), is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy” (Kramer, 2018).

Monetary and Fiscal Policies work in synthesis to control a country’s economy and help it towards its targeted goals. How Walmart e-commerce is affected by these policies? Monetary policy does not seem to have a significant effect on e-commerce although e-commerce seems to certainly help the economy. It is known that monetary policy intents to control inflation. E-commerce provides endless possibilities for cost savings therefore more and more companies are trying to put their feet into the world of e-commerce. The competition has grown. The lower prices and costs lead to decreased inflation on the short run, but not much affect on the long run. Walmart certainly has more affect caused by the Fiscal Policy. "Tax and tariff shakeups could muddy Wal-Mart's path forward” (Soergel, 2017). Brad McMillan, chief investment officer summarized Walmart possible future very effectively: "Looking at President Trump's policies so far, and assuming that he will continue to execute on his promises, we can very reasonably anticipate higher inflation (on the long run), consequent faster increases in interest rates, and decreased consumer confidence as people find their cost of living rising faster than their wages".