The Federal Reserve
Is directly responsible to Congress, the president listens toadvice and if any conflict arise between its goal of making a profit and the public interest, act definitely agree with the latter. As can print money, in exchange for which the state holds titleinterest holders, gets billions of dollars of profits each year that passed a certain level and because of his public mission, ever going to stop the state.
But the Fed is above all an independent body.The objective of the independence of the Fed is to control the money supply away from the immediate reach of politicians (especially the Congress, elected for a term of two years). The Fed's systemdesigners feared that political control of monetary policy would cause large swings in the money supply and macroeconomic instability. The core of the Federal Reserve System is made up twelve banks ofthe Federal Reserve, located in different regions of the country under a central control and led by the Chairman of the Board of Governors. Each of them serves as the central bank to private banks intheir region
There are three tools to carry out its monetary policy:
- Open Market Operations. When the Fed buys financial instruments, puts more money in circulation. With more moneyavailable, interest rates tend to decrease, and thus more money is borrowed and spent. When the Fed sells financial instruments, money out of circulation, causing increases in interest rates, making borrowingmore expensive and therefore less accessible.
- Adjust the amount of reserves. A member bank pays most of the money deposited in it. If the Fed says they should keep more reserves, the amount ofmoney a bank can lend decreases, making loans more inaccessible and causing increases in interest rates.
- Discount rates. Change the rate of interest at which banks can be ordered from the...
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