Why Business People and Students Should Understand the Fed

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2 Wada Farms Wada Farms Grows fresh and processing potatoes, wheat, corn, alfalfa in Eastern Idaho Wada Farms Potatoes Packs and ships fresh table stock potatoes to US markets and some export (Canada, Mexico, Southeast Asia) Wada Farms Marketing Sales, marketing and logistics for fresh potatoes, sweet potatoes and onions sourced from across the US, Canada Idahoan Foods (partnership) Dehydrated potato processor, plants in ID and NV 2

3 Why Business People and Students Should Understand the Fed

4 Do you have a college loan? Are you making car payments? Do you want a good paying job? Do you plan on getting married and starting a family? Would you like to buy a home? Do you plan to save and invest? Do you plan on starting you own business? Will you be traveling abroad? Do you plan to retire comfortably some day? Will you need money? What will your money cost? What will your money return? 4

5 What You Should Know About the Fed Independent within the government Its actions do not require approval of the President or Congress Not funded by the federal government (us tax payers) What does this mean for business and you students? Monetary policy is set in an objective, non-partisan basis 5

6 Show Me the Money We all need a medium of currency to transact business, to buy and sell The Fed is the Central Bank for banks The Fed maintains the checking account of the US Treasury. 6

7 Regulate the Money The Fed s Cash Operations monitors the condition of currency and either sends it back into circulation or destroys it. Businesses and consumers have ready access to cash availability during peak periods of demand, like the Christmas shopping season 7

8 Regulate the Banks As a regulator for financial institutions, the Fed establishes and audits the rules of conduct that these institutions must follow to ensure commercial banks are operating appropriately, and are safe and sound The Reserve Requirement In order to combat the problems of insufficient cash reserves (and the inability to pay depositors) that were faced before the creation of the Federal Reserve System, banks now have to set aside a certain amount of cash in "reserve 8

9 Give Me the Money Before the Fed was created, banks were collapsing and the economy swung wildly from one extreme to the next. The Fed provides a stabilizing force in times of recession and irrational exuberance 9

10 Set Monetary Policy The Fed has a dual mandate: Maximum employment (High productivity, input and output, GDP) and demand for goods and services (PCE, Personal Consumption Expenditures) Stable prices (low inflation) Moderate long term interest rates The FOMC sets Fed Funds interest rates accordingly, either lowering or increasing to generate more or less cash in the system 10

11 Give Me an Opportunity Stable currency provides a friendly business environment Global trading attitudes toward the dollar as the currency of choice, as well as attitudes toward the Fed, provides for stability Accommodative policies helping recovery Low interest rates QE programs, most recently purchases of MBS, further lowering long term interest rates 11

12 The Fed is a Democratic Institution While the FOMC and many Fed economists are in Washington DC, 12 Reserve Bank Districts across the country are the delivery system for the Fed. Reserve Bank district boards, along with the district branch boards are the eyes and ears for feedback to the FOMC 12

13 John C. Williams President and CEO Federal Reserve Bank of San Francisco Present Appointed by District Board of Directors Approved by the Board of Governors Five-Year Term 13

14 2013 Board of Directors of the Federal Reserve Bank of San Francisco Salt Lake City Branch Chairman of the Board Scott Hymas (2013) Chief Executive Officer RC Willey Salt Lake City, Utah Albert Wada (2013) Chairman & CEO Wada Farms, Inc. Pingree, Idaho Damon G. Miller (2014) Utah Market President U.S. Bank Salt Lake City, Utah Josh England (2014) Chief Financial Officer C.R. England, Inc. Salt Lake City, Utah Susan Mooney Johnson (2015) President Futura Industries Clearfield, Utah Patrick F. Keenan (2014) Chief Financial Officer Rio Tinto Kennecott Utah Copper South Jordan, Utah Bradley Wiskirchen (2015) Chief Executive Officer Keynetics, Inc. Boise, Idaho 14

15 How Monetary Policy Affects the Economy and You A change in the fed funds rate will affect short and long term rates, the foreign exchange value of the dollar, and stock prices. This will affect households, businesses and your spending decisions, affecting growth in aggregate demand and the economy Even expectations of Fed policy actions may affect financial markets FOMC Chairman Bernanke s move for Fed transparency has increased stability 15

16 How the Fed Affects You as a Student and Future Business Person Cost of higher education, student loans Healthy, expanding economy creates jobs Fed mandates of maximum employment and stable prices, low interest rates are fuel for this nation to grow GDP at rates that accommodate higher demand and more production without incurring excessive inflation, ie. Jobs! 16

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19 Don t be left Home Alone! College graduates need more than HOPE! You need ROI! You must work hard to gain competitive advantage in today s tough job market! Excellence in grades, knowledge, training and communications skills There is currently a pent-up supply of the unemployed to limited employment demand How will YOU do in your job search? 19

20 Best Wishes for Your Future Success! Albert Wada Cell: (txt msg also) Website: 20