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The US Central Bank and Monetary Policy Are Run by an Elite Group of International Bankers With the Sole Motivation of Personal Gain in Power and Money.

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The central bank and monetary policy are put in effect by using various policy instruments which maneuver the economy.

Interest rates are an obvious method of setting policy for a central bank and can influence the market drastically.

Open market operations can supply money into an economy, and it can raise profit for the central bank if it charges interest on the securities it gathers in the process.

Another item of monetary policy is the ability of a central bank to set reserve requirements for other banks, and this keeps currency supplies at regulated levels.

Margin requirements can be instituted in some cases, and they can directly impact many lending practices and can be considered a form of monetary policy.

The central bank and monetary policy are also involved in setting exchange requirements which affect the balance between local currency and foreign currencies, and this can directly influence import and export trade with other nations.

There are those who consider these abilities to be far too much power for bankers who have little or no concern for the population affected by the policies of the central bank.

A private central bank, they claim, will not act responsibly with such power, but the bank, others claim, will use their power to exploit the less fortunate.

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What is the Interest Rate We Hear About in the Headlines?

The central bank and monetary policy allows the central bank to set interest rates at will on any money it lends, and these aspects of interest are what is spoken of typically in the headlines.

Many Americans typically hear of the interest rates being lowered or raised every night on the news, yet hardly any of them know that their taxes go to pay that very interest owed to the bank.

Henry Liu explains that the Fed funds rate is the rate of interest on loans given by the U.S. central bank.

And that when they set the Fed fund rate, the Open Market Committee attempts to equal that by loaning or borrowing accordingly.

He suggests that the U.S. dollar is the central currency used in international trade.

One can easily imagine the catastrophe to the global market if the U.S. dollar were to crash suddenly, as it is the backbone of many transactions all over the world.

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Why do Banks Have Reserve Requirements?

The reason that the central bank requires a reserve of liabilities to be established is to prevent bankruptcy or liquidation in the event of a bank run.

A bank run, or a run on the bank as it is commonly known, refers to the event when the population grows uncertain of the economic conditions and begins to flood the banks, withdrawing their deposits.

If a bank does not have enough reserves to cover deposit withdrawals, the bank will become insolvent, and it faces bankruptcy.

Bank runs are very dangerous, especially in fractional reserve banking. The central bank and monetary policy in the United States require a fraction of its outstanding obligations to be held in physical reserve to withstand its liability.

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What is the Discount Window?

The central bank and monetary policy also contain an instrument commonly called the discount window.

The discount window is opened during times of crisis when liquidity halts and becomes a major problem in various institutions.

For these reasons, some have suggested it defeats the ideals of capitalism since it aids private institutions in many instances.

The interest rates involved in discount window transactions are special discount or primary rates, and they usually only have short-term limitations.

This is different than the federal funds rate and its equals in other nations. Usually the discount window is only open for a brief moment, but in the event of a seasonal discount window, it can be open as long as nine months.

These policies of the central bank can create an appearance of urgency because there is a terrible crisis in the economic system.

Since more interest is owed than can be repaid, the central bank will be forced to continually pump more money into the system to keep it going.

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