Hoang_Viet - Viet 1 Viet Hoang Dr. Spencer Economic...

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Viet 1 Viet Hoang Dr. Spencer Economic 2301-002 03 March 2009 Point Distribution for Each Paper Written by an Individual Student: Criteria Points Possible Points Earned Topic fulfilled the assignment: How well the selected article illustrated the topic Paper explained current economic issue Paper used appropriate definitions/concepts/theory correctly – Not enough data 30 10 10 5 Writing mechanics: Relevant writing of appropriate length – Way too short Clarity and correct formatting of writing – Incorrect formatting (spacing) 20 4 7 TOTAL 36
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Viet 2 Interest Rate When the Federal Reserve System announced the new about its new proposal of long term borrowings, a lot of comments were raised discussing about its advantages and disadvantages. According to an article in Fortune magazine, “Pain Now, Pleasure Later”, reporter Allan Sloan gave us the briefly idea of his opinion about this plan. Before this announcement of the Fed, we were familiar with the short-term borrowings package which was very low. We only have 0.2% interest for 30 days borrowing Treasury, and 0.4% interest for six months borrowing Treasury (Pain). That kind of interest was low; nevertheless, a lot of investors still bought it due to its safe quality – they could always get their money back without the afraid of losing their money when the banks they had deposited their money went bankrupt. In the need of money to revitalize the bad economy right now, the Fed gave out the long- term Treasury with the higher rate of interest but with pretty long time of holding people money – up to 30 years with the interest of 3.6% per year (Pain). By increasing the interest rate for this long-term Treasury to make people feel they take advantage over the inflation, the Fed wanted to attract more people to buy more Treasuries so they could collect more money in order to recover the hurting economy. However, there was a small but not impossible chance that the Fed will not gather enough buyers such as the British did, and their currency would lose the top place. On the other hand, the long-term Treasury (30-year T-bond) is more convenient than
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Hoang_Viet - Viet 1 Viet Hoang Dr. Spencer Economic...

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