History and Background of Federal Reserve System! (At this page, we try to educate beginners about every aspect of binary optio…

History and Background of Federal Reserve System!

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The Federal Reserve Act is purportedly vague about the concept of a single central bank with hegemonic power. Instead, it opts to delineate a structural hierarchy of 12 Reserve Banks, with a decentralized committee for decision-making and features of both Public and Private banking structures.

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The framers of this act were influenced and lobbied by the powerful bankers of the 1900s, post-dust-bowl, and pre-Depression era gold rush. This system is, in a way, slightly skewed towards favoring the bankers, especially the most powerful of them all. Still, over time with many amendments and expansions to the concept of a Reserve Bank, the Fed has become more of a parent figure to all banks, bankrolled by the tax paid by the hardworking American Citizen.

The Fed ensures that misuse of regulation and liberalization does not take place, which results in the formation of market bubbles, inflation, and ultimately, a recession, which in the worst cases may turn into a full-blown depression. Although there have been some instances where the Fed has been lackluster at its job, without the watchful eye of the Fed, plenty of banks would damage the economy to the point of return with their current practices.

The Federal Reserve is ultimately composed of three bodies, which operate independently and in tandem as well. These are the Federal Reserve System, The Reserve Banks belonging to different states, and the Federal Open Market Committee (FOMC), of which the latter is a newer addition. Together, they shape the monetary policy of the country and affect the economy of the world for the better.

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