Why is the federal reserve system so important?

Answer 1

The Federal Reserve provides a number of vital functions for banking, the government, and the economy.


- They provide clearinghouse operations for checks and electronic treansactions

- They distribute U.S. currency

- They enforce banking regulations

- They represent the U.S. internationally as our Central Bank

- They set monetary policy; aim at maximizing the economy with a minimum amount of inflation.

- They provide elasticity in the money supply to match the needs of the economy.

- They safeguard gold buillion for the U.S. and other countries (the NY Fed branch has store rooms of gold. To transfer from country x to country Y, they just move the gold)

Answer 2

Answer #1 is correct. Here is an analogy explaining why its important:

In the days of the gold rush prospectors had to trade gold nuggets for goods. How to measure and pay small amounts was a problem as was the potential to get knocked on the head and have your gold stolen. So assayers would store the gold and provide prospectors with receipts which could be traded for goods. Merchants and prospectors traded the receipts freely as we do money. Eventually the assayers noticed that gold was rarely withdrawn from their safe and that they could actually issue receipts in excess of the gold they had in their safe.

If you think of the Federal Reserve system as the assayer you have the federal reserve system except the gold has been gone since the 1960's and nothing backs the dollar other than the fact that people are willing to accept for goods and services. The Fed simply issues more and more money as they need it. They also set the interest rates for interbank lending. Banks either borrow or lend money each night to close all transactions and balance. The Fed rate that you hear so much about is the interbank lending rate. Its a fascinating topic but this is getting far to long. Hope this helps.

Answer 3

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the Federal Reserve is the banker's bank. all national charter banks hold stock in and participate as part of the Federal Reserve. The Federal Reserve does some functions that individual banks can't. for example the Federal Reserve is how checks you mail to make payments to out of state businesses get cleared and returned back to your own bank. The Federal Reserve loans money for banks to operate with, and in that way they set the interest rates. your local bank charges you interest on your loan based on what it has to pay to get that money from the Federal Reserve. The Federal Reserve tracks the national need for money and coordinates with the Treasury Department to print currency to fill demand. Controlling the currency allows it to control inflation, called Monetary Policy.

Answer 4

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Why is the federal reserve system so important?

Answer 5

the fed is a privately owned company that bailed the US out of bankruptcy in 1939. they took the country off the gold standard. we have what is known as a fiat money system. (fiat means worthless) if you look at your money it says it is a federal reserve note. a note is a document representing a debt in the good old days you could take a silver certificate to a bank and get gold or silver for it. today all you can get is another note.
let's say that the federal budget is $100M. the congress instructs the secretary of the treasury to print up $100M in US treasury bonds. the sec of treasury takes the bonds to the fed and borrows $100M (fiat) dollars. that money is sent to banks and put into circulation. now this is the good part. we (US taxpayers) have to repay the $100M with interest plus buy back the bonds from investors the fed sold them to. the federal deficit that you hear so much about is the amount owed to the federal reserve.
the taxes the IRS collects (illegally) goes just to pay on that deficit. right now the fed owns the US lock, stock and barrel. they are waiting for another default to collect. what do they collect you might ask. well, our government used you, me and future generations as collateral. haliburton is building work camps in places throughout this country. President Reagan saw this coming. he placed money in a trust fund and named ambassador Wanta as trustee. the fund grew to $27.5 trillion. the money was supposed to be repatriated to the citizens of the US September 7th this year. that would have bought us out of the fed. the admins since Reagan have diverted and stolen money from the fund. the balance is now $4.5 trillion. the money was stolen and diverted by all the admins since Reagan. Wanta was successful in a recent suit to force the Bush admin to release the money. in a midnight deal the Bush admin made a deal with China and N. Vietnam to once again delay payment. type ambassador Wanta in your browser and read for yourself.

Answer 6

"Does the U. S. need the Federal Reserve? Why? or Why not?" Fully justify your answer.

Answer 7

Because they control the flow of money M1 and M2 through setting the cost of money.

Answer 8

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