Reduction of the Federal Reserve’s Economic Value Program The reduction of the Federal Reserve’s Assets both in actuality and prospect has created substantial challenges to various emerging market economies. However, this change has been cited as inevitable in some case, but has caused huge criticism from various global markets. These changes are expected to have domestic as well as global impacts in economic systems (http://www.ny.frb.org, n.p).
According to William Dudely, the President and the CEO of the Federal Reserve Bank of the United States, such abrupt economic policies have a significant impact on social development within United States. One of the impacts could result from a spike in Treasury yield, creating a need to raise government spending. This has a direct impact on social development as it involves spending more tax-payer’s money (http://www.ny.frb.org, n.p).
In relation to societal issues impacted by the policy, the article indicates that such changes could spike up credit excesses leading to a scenario of financial instability as witnessed during the period of the Great Recession (http://www.ny.frb.org, n.p). The financial instability could be as a result of jeopardized debt ratios as well as increased amount of internal debts.
On the other hand, scaling back the Federal Reserve’s Economic value has a great impact on Emerging Market Economies (EME’s). To begin with, it would lead to the reduction of the Federal Reserve’s Liquidity Cushions on foreign exchange creating a scenario whereby foreign investors withdraw their investment capitals. In addition, it would lead to a scenario of jeopardized financial stability within foreign markets thus creating vulnerability in their levels of development (http://www.ny.frb.org, n.p).
“U.S. Monetary Policy and Emerging Market Economies – Federal Reserve Bank of New York.” U.S. Monetary Policy and Emerging Market Economies – Federal Reserve Bank of New York. N.p., n.d. Web. 20 July 2014. .