Analysis Of The Bitcoin Article In Relation To The Theory

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Monetary Policy and Bitcoins
Monetary theory gives a clear outline of the manner in which monetary policy should be implemented in the economy to ensure a controlled supply of money. According to the textbook, the fed is responsible for ensuring that the monetary policy is implemented within the economy. Therefore, the fed can do this by controlling the interest rates and through the open market operations. As well, the monetary policy includes the controlling of the amount of reserve that should be kept by banks.
In regard to the bitcoin article, the transactions of bitcoins are slow in the market hence making it an ineffective form of currency to use within any economy. The Fed requires that the economy is in active participation in the open market operations. This includes the purchase and selling of bonds in order to control the amount of money that is available in the economy. As a result, such open market operations have to take place within a short period because the value of the currency is also appreciating. In the case of the bitcoin, it is difficult to effect the open market operations because completing one transaction can take a long period. In addition, the rate at which its value changes can make it more difficult to benefit from the open market operations as compared to other currencies whose value does not change to create a big difference.
Besides, the Feds controls the interest rates of borrowing in regard to the amount of money that is available in the economy. Given the f...