Financial Structures and the U.S Dollar

FinancialStructures and the U.S Dollar

FinancialStructures and the U.S Dollar

Thestate and the federal government control the banking systems inAmerica. Banking in America has evolved over the years and it hasprovided the best banking services across the world. Major banks thathave revolutionized banking industry include Goldman Sachs, WellsFargo, Citigroup, Bank of America and JP Morgan. All the policiesthat should be implemented concerning the industry are structured andorganized by the state government. Unlike other countries wherecontrol and regulations are frequently combined under one financialagency for easier control, the banking sector in the USA is separatedwith insurance, commodities, and securities monitored and managed bydifferent agencies. According to Newman (2013), this approach allowseach body to greatly influence decisions and ensure efficiency. Theregulation system multitasks to ensure that people enjoy safe,efficient and reliable banking service in the country. As such, itaddresses various issues such as anti-terrorism, anti-moneylaundering, fraud prevention, disclosure, privacy among many moreothers. Some states in the USA also propose their own rules andregulations to maximize security in the banking industry and increaseeffectiveness (Newman,2013).The US dollars is one of the most stable currencies in the worldthus, it has been embraced in as the standard measure of payment andthe most reserved currency.

Stability,Exchange rates, and Fluctuation rate

Thedollar flat currency meaning that it has been legalized by thegovernment to be legal tender. According to Prasad(2014),the dollar has no value other than which the government of the UnitedStates prints on it. The United States uses a floating exchange rateregime. A floating rate exchange system occurs in an economy wherebythe currency price in the operating forex market is determined bydemand and supply of money (Prasad, 2014). The set level is comparedwith the other currencies in relation to the prevailing market demandand the supply. In the case of floating rate in the US, long-termadjustments on the currency shows the prevailing economic conditionin the country. Short-term moves are controlled by an intervention ofthe central bank. For decades, US dollar has often been used as thebase capital due to its relative stability. However, for the last fewyears, an analysis shows that has declined despite the recentQuantitative Easing which prompted the printing of billions ofdollars by the government. The analysts believe that the currencywill not reach hyperinflation (Bradsher,2004). It is expected to be the most constant and reliable currency(Reinhart, 2002). When the extreme liabilities dominate the forexassets, US dollar being base in this situation, unexpecteddepreciations k of bank balance sheet typically occurs and henceaffects the key stability of the domestic financial system.

Securityand crisis in the banking industry

Thebanking industry in the US fairly stable as at now. However, cases ofbanking crisis have been reported in the economy, showing that anygiven economy can never be completely safe and stable. Cases of thecrisis were reported during Panic of 1907 and the 2007-2008 financialcrisis (Wicker, 2011). The effects of the crisis included thebankruptcy of some financial institutions (for example, IndyMac),bank run, and panic in the banking sector. Cybercrime has also been athreat over the few years to the banking industries in the UnitedStates. The cyber criminals hack banks accounts and siphons moneyfrom account holders. To curb the escalating online crime, thebanking industries in the USA has applied top technology in thebusiness information systems. The IT departments are aware of all themoves by the attackers and are reinventing the new strategies thatwill see the hackers being eliminated and banks of the accountholders being safe and not compromised by the hackers (Brian,2012).

Bankingsector in the USA and the promotion of Business

Americanbanks have been influential and helpful to traders in the country. Ithelps finance business of all sizes hence facilitated tradedevelopment and expansion in the United States. For start-upsbusinesses, the US banks offer loans to investors. The banks haveover the year`s instituted new programs that give entrepreneurs theaccess of credit and promote the customer experience (Broz, 2015).The interest`s rate is controlled by the government to ensure thatthe government does not exploit the investors. For that reason, manystarts up businesses succeed. The combinations of different start-upbusiness end up increasing the GDP.

Conclusion

Bankingin America has shaped the destiny of trade in America. US dollar hasbeen chosen as the base capital because of its stability. While thecurrency has been faced with various challenges, particularly theinflation, it is clear that the dollar is still suitable to be usedin various business transactions as compared to other currencies. Theregulation system multitasks to ensure that people enjoy safe,efficient and reliable banking service in the country. As such, itaddresses various issues including terrorism, money laundering, fraudprevention, disclosure, and privacy.

Reference

Broz,J. (2015). TheInternational Origins of the Federal Reserve System.Cornell University Press.

BrianL. (2012).Book Discussion on The Road to Serfdom. C-SPAN. MiltonFriedman. National Cable Satellite Corporation

Prasad,E. (2014).The Dollar Trap: How the U.S. Dollar Tightened Its Grip on GlobalFinance. Princeton,NJ: Princeton University Press.

Newman,P. (2013).The Early Paper Money of America (3 ed.). Iola,Wisconsin: Krause Publications.

Wicker,E. (2011). TheGreat Debate on Banking Reform: Nelson Aldrich and the Origins of theFedOhio State University Press, 2005.