CNN news 2014-10-14 加文本

cnn news 2014-10-14

CARL AZUZ, cnn ANCHOR: Fridays are awesome. This is the 10 minutes of commercial free current events known as cnn STUDENT NEWS. My name is Carl

Azuz. If you were to ride a rollercoaster with ups and downs like the stock market`s had recently, you`d be sick. The Dow Jones Industrial

Average is exactly that, an average of 30 significant stocks in the New York Stock Exchange. It`s one measure of how the whole stock market is

doing. Wednesday, it jumped; yesterday, it dropped. 335 points, its worst day of the year in points. Why? One reason is the European economy.

Investors are getting nervous that Germany, Europe`s biggest economy, could slip into a recession. And when investors get nervous, they sell stocks.

Another reason, The Fed. Its recent moves indicate that it thinks global economic growth may be slowing down.

ZAIN ASHER, cnn CORRESPONDENT: So we`ve all heard that phrase, that, you know, money makes the world go around, but you may have asked yourself once

or twice, OK, well, who makes the money go around? And so the answer is the Federal Reserve, or as my friends and I like to call it, the Fed. So

the Fed is pretty much unlike any other U.S. institution that I can think of. It`s run by a board of governors based in Washington, D.C. It had 12

Federal Reserve banks located around the main banking centers of the country. So places like New York, San Francisco, Philadelphia. The

presidents of these banks and the board of governors, they meet eight times a year to make big policy decisions and to ensure the economy is moving at

a stable clip. So the Congress oversees the Fed, but the Fed does not really answer to Congress. The Fed operates completely independently,

because the Fed doesn`t care about politics. All it cares about is basically two things. Number one, keeping prices stable. And no. 2,

trying its best to ensure that everybody who wants a job gets one.

So if the economy is heating up, it tries to cool things down by raising the cost of borrowing by making it harder to borrow money. And if things

are getting too cold, it does the opposite. So you can sort of think of the Fed like Goldilocks. It doesn`t really like things too hot, too cold.

It wants everything to be just right.

So you`re probably wondering, OK, well, how does the Fed work its magic? What is its secret weapon? The answer is interest rates. So the way the

Fed gets interest rates at just that right level, at that sweet spot, is through buying and selling U.S. Treasuries and other bonds. So when it

wants to cool the market down, it sells U.S. Treasuries, stashes away the cash, and that reduces the money supply, so that makes it harder to borrow

money, and that basically slows down economic growth. When it really wants to heat the market up, it essentially starts buying up U.S. Treasuries and

other bonds. That floods the market with cash and fuels economic growth. So it`s not necessarily a perfect system, but it works, at least for now.

And as they say on Wall Street, don`t fight the Fed.

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