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Planet Money: Black Workers and the Fed

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Federal Reserve (“The Fed”)
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Terms in this set (31)
Also known as “The Fed.” This is the U.S. government’s central bank, established in 1913 to stabilize the economy in the areas of employment, consumer prices, long-term interest rates, and banking and consumer credit regulation. The leaders of the Federal Reserve, known as governors, are some of the most significant policymakers with regard to the United States economy. One example of the Fed’s influence is in the interest rate it charges on the money it lends to banks across the nation; the interest rate charged to the banks directly affects the interest rate that the banks charge to American consumers on mortgages, car loans, and business loans.

Podcast host Cardiff Garcia explains that the Fed raised interest rates in December 2015, “which is another way of saying that the Fed had decided to remove some of the support that it was giving the economy.” He notes that while unemployment among white Americans was low at that time (4.4%), unemployment among Black Americans was significantly higher (8.5%). Garcia’s implication is that the Federal Reserve governors were too narrowly focused on the labor market for white Americans at the expense of Black workers.
The fee that is charged to a person or business when they take out a loan from a bank. The fee is expressed as a percentage of the loan amount. For example, a 4.5% interest rate would mean that if you borrowed $100, you would owe the bank $104.50 after one year. Credit cards also charge an interest rate if they’re not paid off in full each month.

When the Federal Reserve wants to encourage Americans to spend more money, it lowers the interest rate it charges to banks that it lends money to. Banks, in turn, lower the interest rate they charge to individuals and businesses. When the Fed’s interest rate is low, the long-term cost of loans is lower. When the Federal Reserve wants Americans to spend less money, it raises the interest rate. The Federal Reserve makes decisions on when to raise and lower the cost of loans based on a prediction of which option will best suit the needs of the United States economy.
The systems of production, distribution, and consumption of goods within a nation. One form of economic system is the command system, in which the government determines what goods will be produced, how they will be distributed, and how much the goods will cost for consumers. Conversely, the economy of the United States is a demand economy, in which goods are produced and distributed based on the purchasing habits of American consumers. During times when the system of production, distribution, and consumption of goods is disrupted (such as during the pandemic) the Federal Reserve may implement methods to help mitigate (lessen) the negative impacts of the disruption on the economy.
A metric that quantifies the percentage of people who are jobless, capable of working, and attempting to find employment in relation to the total number of people in the labor force, the members of society who are able to work. The formula is represented by the number of unemployed (UE) divided by the total labor force (LF), multiplied by 100, which equals the unemployment rate (UER). (UE/LF) * 100 = UER.
Image: Unemployment rate
Shockingly; indecently; disgracefully. In the podcast, host Cardiff Garcia uses the phrase “scandalously tough” to describe the state of the economy for Black Americans in December 2015. Black Americans experienced an unemployment rate nearly twice that of white workers. The Federal Reserve raised interest rates at that time, not appreciating that those rates needed to remain low for a longer period of time to ensure that their rate policy did not exclusively benefit white workers. Despite the fact that unemployment was still high for Black workers in 2015, the Fed began to increase interest rates.