Question

In: Finance

Do you think Benjamin Strong would have agreed with the words below spoken by Franklin Roosevelt...

Do you think Benjamin Strong would have agreed with the words below spoken by Franklin Roosevelt in 1933?

“The world will not long be lulled by the specious fallacy of achieving a temporary and probably artificial stability in foreign exchange on the part of a few large countries ... The sound internal economic situation of a nation is a greater factor in its well-being than the price of its currency.”


Solutions

Expert Solution

Benjamin Strong took charge as the executive officer for the federal reserve system in November 1917. He recognized the importance of open market operations, importance of purchase and sale of securities. Strong unofficially opposed the gold standard and started continuing open market operations in order to stabilize domestic prices and maintain internal economic stability.

From what Strong has done during his days, we can say that Strong might have agreed to Roosevelt's words about foreign exchange .Since Staring wanted a strong internal economic stability, he would have felt the same thoughts as that of Roosevelt about internal economic situation and currency value.

When the value of currency raises, inflation occurs, which will disturb the economy. Inflation will lead to reduced expenses and in turn reduce cash flow in economy as a result of reduced spending. Hence it is important for a economy to be stable than the currency value.


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