Exerting Control and the Federal Reserve: The basics of the economy

By Owen Linderholm | Small Business

This is the sixth of our blog posts connecting the basics of the economy to small business. We are taking the popular series of basic economic videos called ‘We the Economy’ and connecting them to the way your small business (or prospective small business idea) operates. Over the next twenty or so weeks we are going to take a regular look at the very basics of our complex global economy and once a week we will present one of the videos from the series and try to add a little context, especially for anyone who is thinking about taking a tiny step toward being a more direct and powerful cog in the enormous economic machinery by starting their own business.

The Wheels Go Round and Round

First, go watch the video below. Depending on your political views, beliefs and other factors, you will react very differently to it but please bear with us. Our mandate here at Yahoo Small Business Advisor is to encourage and support small business owners. And typically that means VERY small businesses. Like under 5 employees small. This video is about the very other end of the economy, the Federal Reserve and how it controls the US economy, the single largest and most influential piece of the global economy. So at first glance it has very little to do with you.

But the reality is that the policies of the Fed, as it is known, probably have more to do with small business than any official policies from the rest of the Federal Government that ostensibly affect small business. Why is that? Because the Fed controls the supply of money in the economy and the rate at which it circulates. Small businesses, more than any other kind of business, rely on that liquidity and movement to ensure that there are always prospective customers out there. Basically, small businesses always want to see the Fed boosting the economyby encouraging spending. Of course, too much of that could have other effects that in the long run could be worse. But in the present and immediate future more spending translates into more opportunities for revenue.

This video won't help you all that much, except to make it clear that the Feds policies DO affect you. But consider that a starting point and work at building a business that can not only take advantage of the Fed's expansive moods but also weather the times it sees a need to slow the economy down.

Want your fair opportunity to build a business and a life for yourself? Think positively. Take a look at our previous episodes, 'Cave-o-nomics', 'Supply-and-Dance', 'GDP Smackdown', 'Lemonade Wars' and 'Tragedy of the Commons' and also check the links below for more information about getting started on your own business idea.

Is It Time To Start Up That Startup Business?

How to Increase Your Profits as Monetary Policy Tightens

How to Measure Your Company's Overall Financial Health (Infographic)

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