The Federal Reserve has enormous power.The Federal Reserve’s many important responsibilities include setting interest rates, regulating dollar value, and monitoring inflation rates, all of which affect precious metal markets, including silver and gold bullion.With an institution that has so much impact on our economy, it is important to have at least a basic understanding of what the Federal Reserve is and what role it plays in our nation’s financial sector.
Here are 5 key facts about the Federal Reserve.
1. The FR is a private organization. When people think about it, many mistakenly assume that it is a public institution – the finance department of our federal government. However, the FR is owned by 12 commercial banks, each of which is owned by regional, commercial and foreign banks, as well as by several individuals who have inherited an interest in the system (Rockefellers, Rothschilds, etc.).
2. The Federal Reserve has a monopoly on foreign exchange flow in America. This is done by controlling the lending by commercial banks. As the number of new loans increases, so does the money supply; As the loans fall, so does the money supply. The FR has the power to determine the amount of new credit (and ultimately the money supply) by doing one of three things:
2.1. Change the required reserve rate
2.2. Banks can borrow at a reduced rate at the FR
2.3. Buying and selling bonds.
Essentially, this means that the Federal Reserve is able to borrow an infinite amount of money at 0% interest.
3. Inflation is caused by the Federal Reserve paying interest on future cash. If all the printed money is used to repay the debt, how is the interest paid on the debt? The answer is that money printed in the future will be credited to interest. Inflation is a natural by-product of this system.
4. The potential money supply is infinite. Prior to 2008, commercial banks had to keep at least 10% of their deposits as reserves, limiting the possible creation of money to 9 times the amount of the deposit. However, a minor clause in the September 2008 Emergency Economic Stabilization Act / TARP Act reduced the requirement to 0%, meaning that there are no restrictions on the amount of money that can be created and there is no protection against uncontrolled inflation.
5. There is a debate about the constitutionality of the Federal Reserve. Strict supporters of the US Constitution argue that the federal government does not have the authority to set up a central bank, especially one that is as generous as the FR. The defense lawyers respond by saying that currency regulation was indeed approved by the founding fathers, and it is simply a matter of interpretation.
Interestingly enough, if you look at the history of the Federal Reserve, you will find that this coalition of banks is indeed the third institution in our country’s history, and there has even been an 80-year period in which we rely entirely on a central bank had to do without these are some of the things that you ought to be knowing about federal reserve
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