Should monetary policy be boring and has this been the case for the UK Essay

Should monetary policy be boring and has this been the case for the UK and the USA over the last ten years - Essay Example With the use of monetary policy, U.S. and UK can counter-act inflation and economic recession or depression. In this paper, the historical strategy used in the monetary system of U.S. and UK will be elaborated. Through the historical events associated with the U.S. and UK monetary policy, we will be able to conclude whether monetary policy is boring or not. Many people have been praising the work of Fed Chairman Alan Greenspan i for making the U.S. monetary policy in 1990s very successful. (Mankiw, 2001) The Fed was at the center stage during the Asian financial crisis between the years 1997 – 1998 including the failure of hedging the Long-Term Capital Management of funds in 1998 created a worldwide financial crisis and Globalization in the 20th century. The U.S. monetary policy together with the help of fiscal discipline, the U.S. government budget deficit was converted into surplus. Prior to the Mexican crisis in 1994 and the Asian crisis in 1997, the economic performance of U.S. has been very stable. At that time, the real GDP growth of U.S. has increased more than 3% over the fourth quarter of 1996, inflation and the unemployment rate was maintained at a low level. Because of the continuous economic growth in U.S., the nominal wages and salaries of the workers increased faster than the prices of commodities. The increase in salary and wages resulted to increasing the efficiency of production output by investing on new technologies. During the last quarter of 1996, a lot of companies have been laying off employees. This causes the U.S. unemployment rate to increase. Also, consumer debt, credit card delinquencies and personal bankruptcies was very high. In February 1997, the Federal Reserve became very concern about the risk of inflation because of the sudden appreciation of the U.S. dollar. During the height of U.S. economic activities, high inflation should be avoided since it would weaken the long-run economic growth