A negative consequence, however, would be increased volatility in the value of the dollar. Imports would become more expensive as well, increasing inflation and potentially compelling the restructuring of the economy. Increased currency risk -- transaction and translation -- would also create difficulties for U.S. companies operating abroad. I do not support such a proposal. Attempts to jury-rig a global currency are as impractical as enforcing Esperanto as a global language. Such a currency would be inherently unstable, as the Euro example has shown us. The constituent communities would be committed to enforcing controls on each other in order to maintain the integrity of the currency. If at some point the currency of another economy overtakes that of the U.S., it will be because that economy is stronger, larger and more stable -- fundamental market forces -- rather than as the result of a political decision.
3. a) The Fed played a role in the crisis, by overstimulating the economy with low rates. The economy was showing signs of recovery but the Fed decided not to address the housing bubble. The Fed also raised rates too quickly to end the bubble, putting my mortgage holders in a position of being unable...
The Fed simply did not consider the microeconomic impacts of its actions, only the macroeconomic. Other authorities failed in their oversight of the banking industry, in particular with regards to risk levels and the use of complex financial instruments to mask that risk.
b) Central bank credibility is not called into question in a situation like this. The role of the central bank is to manage the economy, balancing growth and inflation. That the central bank in this case erred in judgment (especially in hindsight) does not indicate a fundamental flaw in the system. The central bank system is needed to foster economic stability to the greatest extent possible. Without the central bank, this would be more difficult, not less difficult. No central bank can be expected to be perfect and there is no reason to believe that in this case the central bank did anything other than make an error in judgment.
Works Cited:
Google.com. (2010). Unemployment rate. U.S. Bureau of Labor Statistics. Retrieved April 23, 2010 from http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&tdim=true&dl=en&hl=en&q=U.S.+unemployment+rate
