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BilPrestonEsq
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What is it? What led us to having the Federal Reserve in the first place? What does the Federal Reserve do for us now?
BilPrestonEsq said:What is it? What led us to having the Federal Reserve in the first place? What does the Federal Reserve do for us now?
WhoWee said:A little background.
http://www.referenceforbusiness.com/encyclopedia/Fa-For/Federal-Reserve-System.html
brainstorm said:It sets interest rates by selling treasury bonds, I think.
talk2glenn said:This is not quite right, but is a pretty pervasive myth.
What the Fed sets are target rates for things that are determined by the market, including the interest rate on Treasury's (which is a function of their price). It encourages the market to move towards target rates via a basket of powerful tools, but it cannot wave a magic wand and mandate that, say, Treasury bonds trade at a given interest rate.
You're right in principle, though: the Fed does try and maintain (among other things) a target interest rate by manipulating (buying and selling in) the debt market.
WhoWee said:"The Federal Reserve System is the central bank of the United States. The Fed is exclusively a banker's bank and does not conduct commercial banking activities. Its goal is to attain stable economic growth in the nation, and through its actions, influence the flow of money and credit in the economy. Specifically, the Fed is responsible for:
formulating monetary policy;
acting as lender of last resort for the nation's banks and depository institutions;
facilitating the collection and clearance of checks;
regulating and supervising banks and other financial institutions;
acting as fiscal agent for the United States Treasury;
distributing coin and currency to the public through depository institutions; and
implementing certain regulations of consumer credit legislation.
The system consists of the Board of Governors, the Federal Open Market Committee, 12 Federal Reserve Banks, 25 branches, member financial institutions, and advisory committees. "
BilPrestonEsq said:So if it is their sole purpose to make sure things run smoothly why has the dollar decreased in value so much over time? Why do we have recessions?
BilPrestonEsq said:So all the dollars in existence came from the fed, with interest, loaned to commercial banks?
BilPrestonEsq said:So what am I missing? Why isn't the Fed doing what it is supposed to do? Why more and more debt? Why more and more inflation? I want a real answer, WHY? Yeah their purpose is to keep things stable right? So why isn't the economy stable then? Someone please explain why the Fed does nothing that it is supposed to do. Why isn't there plan working at all? Again, what am I missing here?
WhoWee said:The Fed controls liquidity and the discount rate. The interest rates are low - but stable. At the same time inflation has been fairly stable as well. Gas prices (and prices affected by fuel costs) are now increasing.
As for debt, there are several different types. The Fed can only affect the amount that banks might loan. Government spending (and borrowing) is outside the control of the Fed. Consumer credit is also beyond the scope of the Fed. Additionally, the stock, bond, and futures markets are all independent of the Fed.
Now, with all of that said - the Fed is currently engaged in QE-2 (Quantitative Easing 2).
http://money.cnn.com/2010/11/03/news/economy/fed_decision/index.htm
It is intended to stimulate the economy - but there are no guarantees.
BilPrestonEsq said:This is what I am talking about. The inflation rate is stable? So it is constantly growing, as is debt. What is stable about that? So stability comes from the knowing that debt and inflation are going to continuously rise, until what? Stimulate the economy by QE-2! What happens when that translates into inflation? I want to separate what the banking system does from everything else. These are all half answers. I understand what the Fed says it does, but has it accomplished any of its goals in stablizing the money supply for the good of the country and the world? Who gains from rising inflation and rising debt but bankers?
BilPrestonEsq said:This is what I am talking about. The inflation rate is stable? So it is constantly growing, as is debt. What is stable about that? So stability comes from the knowing that debt and inflation are going to continuously rise, until what? Stimulate the economy by QE-2! What happens when that translates into inflation? I want to separate what the banking system does from everything else. These are all half answers. I understand what the Fed says it does, but has it accomplished any of its goals in stablizing the money supply for the good of the country and the world? Who gains from rising inflation and rising debt but bankers?
Ronnin said:The FED's power resides in its ability to influence interest rates and market liquidity. They can also set the reserve percentage which directly influences how much banks can lend against their capitalization requirements. But, all of these "tools" cannot change the fact that the economy is not exactly humming along right now and for all the money the government has thrown at the problem we are going through a period of deleveraging. The country as a whole has taken a huge write down of assets and because of that "we" collectly don't have the worth we had before. Therefore "we" cannot borrow as much or at the same rates so some payback must occur to bring things back in line.
BilPrestonEsq said:The inflation rate is stable? So it is constantly growing, as is debt. What is stable about that?
The Federal Reserve, also known as the Fed, is the central banking system of the United States. It is responsible for overseeing and regulating the country's monetary policy and financial system.
The main purpose of the Federal Reserve is to maintain a stable and healthy economy by controlling inflation, promoting employment, and regulating the banking industry. It also serves as a lender of last resort and provides services to financial institutions and the government.
The Federal Reserve is owned by individual member banks, which are required to hold stock in the Federal Reserve System. However, the Board of Governors, appointed by the President and confirmed by the Senate, has overall control and management of the Fed.
The Federal Reserve controls interest rates through the Federal Open Market Committee (FOMC), which sets the target for the federal funds rate. This rate affects the interest rates that banks charge each other for overnight loans, and ultimately impacts the interest rates for consumers and businesses.
The Federal Reserve is an independent entity, meaning it is not directly controlled by the government. However, it works closely with the government and is subject to oversight by Congress. The Fed also plays a crucial role in financing the government through the buying and selling of government securities.