Running head: OPEN-MARKET OPERATIONS 1 Understanding the Nature of the Open-Market Operations John Dizzle Embry Riddle Aeronautical University RSCH 202 OPEN-MARKET OPERATIONS 2 Understanding the Nature of the Open-Market Operations Introduction to the War Driven Open Market Operations The purpose of this paper is to understand the nature of the open-market and its operations. Also, it will help the reader understand how affects us every day. The term openmarket operations is a business term simply meaning that it is a form of activity in which the Federal Reserve uses as a mechanism to buy or sell government bonds on the open market. The problem here is resource management. Using fiat currencies and a Federal Reserve Banking system to have access to resources needs to adjust. If we do not fix the problem, we will eventually reach a point where the open market operations that are only sustainable through a banking cartel will collapse. It is important to fix this problem because most economies are war driven and when economies start to tank, riots and war tears countries apart to include their neighboring country. Jacques Pauwels, a historian and political scientist wrote a piece for the Global Research Organization which examines global economies and their state of operation. He writes, \"This system - America's brand of capitalism - functions first and foremost to make extremely rich Americans like the Bush \"money dynasty\" even richer. Without warm or cold wars, however, this system can no longer produce the expected result in the form of the ever-higher profits the moneyed and powerful of America consider as their birthright\" [Pau16]. What he is getting at is that there are a few in charge guiding our economy and open market operations to countries that seem to have been targeted for war with the promise of economic return. OPEN-MARKET OPERATIONS 3 Literature Review How the Market and Commerce Works One way to better understand the open market operation in America to include Europe would be to go back to the 2008/2009 major recession we endured. Once this happened, monetary policies had to be developed and enacted immediately in order to control the stability of the economy and the value of the currency. Dr. Puriya Abbassi published a paper describing the financial crisis and monetary policies and how they are coherent with one another. \"The financial crisis has deeply affected money markets and thus, potentially, the proper functioning of the interest rate channel of monetary policy transmission. Therefore, we analyze the effectiveness of monetary policy in steering euro area money market rates by looking at (i) the predictability of money market rates on the basis of monetary policy expectations and (ii) the impact of extraordinary central bank measures on money market rates\"[Abb12]. Now we understand that money and policy work hand in hand. Policy directs money while economies adjust to them no matter the political atmosphere. Tariffs and taxes are another major influential element of open market operations. In order for a country to make money on imported and exported goods, they levy a tax or tariff on it. The problem is, it is not an effective system. Dr. Sandra Sequeira published a paper called \"Tariffs and corruption: evidence from a tariff liberalization program\" to the London School of Economics and Political Science. In the paper she writes, \"Tarif evasion often takes place through the misrepresentation of import prices, the underreporting of quantities or through the misclassification of imported products into lower tarif categories\" [Seq13]. So it this easy that you can just skew a few numbers for the accountability process which changes the tax percentage and sneak the goods right into the country for an increase in profits. OPEN-MARKET OPERATIONS 4 Interest Rates The next thing to understand is the interest rate process. As a component of its obligation regarding the money related approach, the Reserve Bank Board sets an objective for the interest rate. This is the rate at which banks obtain from and loan to each other on an overnight, unsecured premise. The interest is dictated by the rate and supply of trade settlements and adjusts that business banks hold at the Reserve Bank. Through its open market operations, the Reserve Bank changes the volume of these parities in order to keep the money rate as close as could be expected under the circumstances to its objective which is the most profitable but sustainable in the given market. David Director Friedman from the Economist goes into detail about the principle. \"The principle is simple: because the Fed controls the supply of reserves, it can also control their price. But this mechanism is not available any more. That is because since 2008, under its policy known as quantitative easing, the Fed has bought $3.8 trillion worth of Treasuries and other securities in attempt to stimulate the economy. In doing so, it created huge pools of new money, so that today banks are awash with reserves. To push up interest rates, the Fed would need to unwind all these purchasessomething it does not want to do until rates are higher\"[DD15]. This makes it clear that the physical money supply is completely monitored, manipulated, and managed for profit. Ben Bernanke, an American economist at the Brookings Institution and former Chairman of the Federal Reserve serving two consecutive terms comes right out says what the Fed does in regards to interest rates. He wrote in his own personal blog for the Brookings Institution about the interest rates being low. He writes, \"The Fed does, of course, set the benchmark nominal short-term interest rate. The Fed's policies are also the primary determinant of inflation and inflation expectations over the longer term, and inflation trends affect interest rates, as the figure OPEN-MARKET OPERATIONS 5 above shows. But what matters most for the economy is the real, or inflation-adjusted, interest rate (the market, or nominal, interest rate minus the inflation rate). The real interest rate is most relevant for capital investment decisions, for example\"[Ber15]. As the former Chairman of the Fed, it is clear he knows what he is talking about. He lays it out for everyone to understand, it's all rigged, but rigged in a way that only certain people can benefit from the open market operations, specifically those with big capital. Tangible Currency and Manipulation So now we understand that the tangible, being the money supply which is governed by interest rates, and the intangibles, being the policies, rules, regulations, and ACT's enacted by the political climate, which makes it clear that the entire enterprise is being manipulated and controlled. So when we call this financial system an \"open-market operation\Research Methodology Assignment For the research question and hypotheses you developed in your Module 5 Literature Review assignment, write a report outlining the type data you would collect, how you would collect it, and how you would analyze it. Your report must contain the following sections: Study Design, Population and Sample, Variables and Measures, Data Collection Methods, Data Analysis Methods, and References. See Report 3 starting on page 374 of the Sekaran and Bougie text for an example, but remember that your report will differ from this example because you are not actually completing the analysis. You will turn in this assignment in Module 9. The primary purpose of this assignment is to give you experience in determining appropriate research methods to be used with the research question and hypotheses you have posed and with the type data you would need to collect to answer your question. Your report must contain the sections indicated in the previous paragraph, and APA formatting standards must be followed throughout. The paper does not have to be lengthy; perhaps 750 to 1500 words. You may find it helpful to outline your paper before you begin to write it. An outline helps you see the logical connections (or lack thereof) among the parts of the paper. The following gives more information on what should be in each of the sections mentioned above. A good point to keep in mind is that your methodology section should be in enough detail that if you gave someone else your methodology section and your data, they could do the analysis. Study Design - This is a brief overview section. You should repeat the research question and hypotheses from your literature review assignment here, then briefly tell what type of study you would do, what type of data you would collect, and how you would collect and analyze the data. Most of these points are covered in more detail in later sections. Population and Sample - This is a short section describing the population for your report, your sample, and how your sample will be selected. Variables and Measures - Describe the variables in your study. Indicate whether they are independent, dependent, moderating, or intervening. Describe the relationship among the variables. Tell how they will be measured. Data Collection Methods - Tell what kind of data you need to collect and how, where, and when you will collect the data. If you plan to use a survey or questionnaire, include a copy of that instrument in an appendix to your report. Also include a copy of your cover letter for your survey. If you plan to interview, tell if it would be structured or unstructured and why. If it is a structured interview, include the questions you would ask in an appendix to the report. Data Analysis Methods - Describe the techniques you will use to analyze the data. Indicate why you selected those methods and why they are appropriate for your study. References - Your report must contain a reference section that includes all sources in your paper. References must be in APA format. Rubric for Grading the Research Methodology Assignment The following rubric will be used for grading your research methodology assignment. You should read through the rubric prior to completing the assignment as it tells you the important things your instructor will be looking for as he/she grades your assignment. Study Design 10 points Population and Sample 10 points Variables and Measures 20 points Data Collection Methods 20 points Problem and hypothesis are correctly stated. Good concise statements of the type of data to be collected, and summary of how it would be collected and analyzed. Problem and hypothesis are correctly stated. Statements of the type of data to be collected, and summary of how it would be collected and analyzed misses some key points. Accurately describes the population and the sample and how the sample will be selected. Population and sample and how the sample will be selected are described with a few minor errors. All variables are accurately described and classification as to whether they are independent, dependent, moderating, or intervening variables are accurate. Relationships among variables are described and accurate. Accurate descriptions of how variables will be measured are given. Accurate description of the kind of data needed to complete the study and how the data will be collected are given. In the case of surveys and questionnaires, a copy is included in an appendix and surveys or questionnaires are well formulated. For structured interviews, proposed interview questions are included and well formulated. Variable descriptions and relationships are mostly accurate with minor errors. Descriptions of how variables will be measured are mostly accurate with minor errors. Description of the kind of data needed to complete the study and how the data will be collected are mostly accurate with some minor errors. In the case of surveys and questionnaires, a copy is included in an appendix and surveys or questionnaires contain only minor errors. For structured interviews, proposed interview questions are included and contain only minor errors. Page 1 of 2 Problem and hypothesis are stated but with errors. There are substantial errors in the statements of the type of data to be collected, and summary of how it would be collected and analyzed. There are major errors in the description of the population and sample and/or how the sample will be selected. There are major errors in the descriptions of variables and their relationships as well as in the descriptions of how they will be measured. Problem and hypothesis are not stated. The statements of the type of data to be collected, and summary of how it would be collected and analyzed are missing or totally erroneous. Little or no attempt is made to describe the population and sample or the descriptions are totally inaccurate. Little or no attempt is made to describe the variables, their relationships, or how they will be measured, or descriptions are completely inaccurate. There are substantial errors in the description of the kind of data needed to complete the study and how the data will be collected. In the case of surveys and questionnaires, a copy is included in an appendix but includes numerous errors. For structured interviews, proposed interview No attempt is made to describe the kind of data needed to complete the study and how the data will be collected. Copies of surveys, questionnaires, or structured interview questions are not included. Data Analysis Methods 20 points Proposed techniques for analyzing the data are appropriate and fully and accurately described along with an explanation of why the techniques were chosen and why they are appropriate for the study. Most techniques described are appropriate with some minor errors. Explanation of why the techniques are appropriate and why they were chosen misses some key elements. References and Formatting 10 points Consistently applied APA guidelines in regards to all aspects of the paper including citations, references, headings, page numbers, and running headers. Consistently applied standards of English composition. There were no grammatical, spelling and/or punctuation errors and transitional phrases were used to guide the reader throughout the text. Assignment submitted on time. Manuscript conformed to most APA guidelines Writing and Timeliness 10 points Paper conformed to most standards of English composition. There was an occasional grammatical, spelling and/or punctuation error. Timeliness of delivery was acceptable. Page 2 of 2 questions are included but contain numerous errors. Many techniques described are inappropriate. Explanation of why the techniques are appropriate and why they were chosen is sketchy and omits many key elements. Weak, incomplete, ambiguous, or inconsistent application of APA formatting. Weak, incomplete, ambiguous, or inconsistent application of rules of English composition. There were frequent grammatical, spelling and/or punctuation errors. Delivery was delinquent. Analysis techniques are either inappropriate or not given. No explanation of why the techniques were chosen or why they are appropriate is given. Failure to apply APA rules for manuscript presentation. Failure to apply standard rules for English composition. There were many grammatical, spelling and/or punctuation errors that distracted the reader from the content of the writing. Delivery was delinquent