The principal function of the Federal Reserve is making sure that there is enough cash in terms of coin in movement and currency to meet stipulations from the populace. The Federal Reserve creation is a result of the variations in the populace stipulations as there is a seasonal rise and fall of demand, and this goes hand in hand with the level of economic changes (LUCARELLI, 22, 2008). A good example is, during the holiday season whereby an institution increases their orders of coins and currency from Reserve Banks so as to fulfill client needs. Reserve Banks, in 2003, conveyed to depository organisations about 36.6 billion notes having a value of 633.4 billion dollars and received from depository institutions about 35.7 billion notes having a value of 596.9 billion dollars.
To understand the US external asset position measurement, I will use the United States total international asset position of 1952-2004 by the use of the official series despite its drawback of not measuring the investment at the current prices but at historical cost.
Due to this, there is a need to reconstruct the estimates of the market values of each liability and asset dating back to 1952 through the combination of BEA’s international investment positions data and the international transaction data from both the flow of funds and BEA (LUCARELLI, 38, 2008). The computation of the dollar is in terms of capital gains or losses for each asset class and this is used to determine the international investment position. Surveys of the treasury benchmark on exterior liabilities and assets are used to make nation weights and currency approximates in the United States financial portfolio (LUCARELLI, 21, 2008).
The developed series gives an account of US exterior fortunes dynamics at market prices in quarterly basis from 1952 differentiated by asset form. Fig; 2 Fig; 2 above gives the report of three discrete determinants of the total US foreign asset ranking (SEABROOKE, 89, 2001). This is obtained by taking the ordinary estimate reached to by accumulating current accounts, additionally the BEA’s estimates of the US International Investment Position at market value from the 1982.
From this, it depicts that US went from substantial creditor position in 1952 which had 15 percent of the GDP to a considerate debtor position depicted by -26% of the GDP towards the period end. Fig; 2 depicts the same general tendencies depicting that component of valuation have vital weight on both medium and short run changes of the United States exterior ranking.
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