Kenneth R. Szulczyk
The FOMC consists of the Board of Governors, plus five Fed district bank presidents.
President of the Federal Reserve Bank of New York City is a permanent member of the FOMC
and is always the FOMC vice-chairperson because New York City is the financial center of the
United States. The Fed buys and sells government securities through the New York Fed Bank.
Remaining four positions for the FOMC are rotated among the other 11 Fed district bank
presidents. Moreover, the Fed buys securities from the secondary markets. If the Fed bought
securities directly from the primary market, then it would be buying directly from the U.S.
Treasury. Thus, the Fed would not be independent from U.S. Treasury if it buys new securities
in the primary market.
Chairperson of the Board of Governors is also chairperson of the FOMC. This person is a
powerful man because he or she could advise the President, informs Congress of the Fed’s
actions, and is the spokesperson of the whole Federal Reserve System. When he or she speaks,
everyone in the financial world listens. Current chairperson is Janet Yellen, and many consider
her the second most power person in the United States after the U.S. President.
The European Central Bank Kenneth R. Szulczyk
The European Union (EU) created a common market among European countries. Many
countries eliminated customs between EU countries as they erected common customs to the
outside world. Thus, capital, goods, labor, and services can move anywhere within the EU
freely. Furthermore, the EU has improved efficiency in other areas. Many EU countries reduced
or eliminated their purity and labeling laws that stopped imports from other EU members. For
example, the Greek government removed regulations for ice cream while Belgium removed its
chocolate laws. Even Germany removed its beer purity law that was passed in 1516. That law
required all German beer producers must make beer from only four ingredients: barley, hops,
water, and yeast.
The EU allows new countries to join, but they must overcome many obstacles for
membership. Both Turkey and Croatia want to join the EU, despite the 2012 European Debt
Crisis. EU membership requires a member country be a democracy, where the citizens elect the
government officials. Furthermore, governments must respect human rights and have a
functioning market economy. As of 2012, the EU has 27 members.
The European Union had created new institutions, such as the European Parliament and
European Court of Justice. These institutions are not concentrated in one country but spread
across EU members. Most institutions are located in Brussels, Luxembourg, and Strasbourg.
One drawback to the European Union was the EU created new bureaucracies, as the top level of
government. The EU employed approximately 33,000 government officials and bureaucrats in
2012.
Seventeen EU members use the common currency, the euro that we refer to as the
Eurozone. The Eurozone replicates the United States by forming the world's largest market with
a single currency. As a large number of countries shares one currency, it creates four benefits.
First, a single currency has no exchange rate risk. Citizens from different countries can sell and
buy goods with one another, and they do not worry about changes in the exchange rate. Second,
a single currency reduces the transaction costs because the parties do not convert one currency