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Who is Performing the Functions of the American Central Bank and Why Are Private Interests Controlling Public Welfare?

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In the contemporary setting, the functions of the American central bank can be compared to a banking mafia.

Like other central banks around the world, the Federal Reserve revolves around key aspects of economic policy, namely monetary and fiscal policy.

In a nutshell, the American central bank acts as the watchdog of economic health, implementing and modifying economic policy in order to ensure the economy functions smoothly (or so they say).

The central bank, or the Fed in the U.S. as it exists today, was formulated as a result of the 1913 Federal Reserve act which created a central bank and placed in its hands the fate of each and every American’s hard earned money.

As such, the functions of the central bank should be focused on the larger economic benefit of the American people, and in principle they are.

However, actions speak louder than words; today’s economic condition goes a long way to show how the American central bank has performed its duties.

To begin with, the central bank is in charge of the finances of the government by way of issuing government securities such as T-bills and bonds.

The central bank also regulates money demand by the manipulation of the long term and short term interest rates.

Finally, the Fed provides the overall regulatory framework and system within which every major banking corporation in the United States functions.

In summary, the function of the central bank or the Federal Reserve is to act as the regulator for the entire economy.

It is managed by the Board of governors consisting of seven members with a chairman, all of whom are appointed by the President of the United States.

These members are sourced from regional and state Federal Reserve banks.

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Monetary Policy in Action

The Fed, in the name of functions of the American central bank, can do several things in terms of monetary policy.

Namely, it can change interest rates, increase or decrease holdings of government securities through open market operations, regulate depository or reserve requirements amongst the various banks throughout the United States, and other similar policy level actions.

Each of these functions of the American central bank are performed by the Federal Open Market Committee or FOMC, to which the term Fed often refers.

In having these powers, the FOMC essentially has a free run of the market and given its questionable Federal status, is literally empowered to take control of every American’s economic freedom.

Hence, why the alias of such practices and organizations are referred to as the banking mafia.

The subprime debacle was caused by interest rates, let us not forget.

In addition, interest rate manipulations can have a serious impact on dollar foreign exchange values.

The country has already gone through a phase of a serious dollar depression and it’s not surprising that it’s in the economic mess that it is.

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Fiscal Policy Fallacies

The fiscal operations of the fed refer to the control of the money supply within the economy.

The fed exercises its control over the flow of money by printing money as and when needed.

This is unfortunately, another side effect of the fact that the Fed is not adequately supervised.

Whenever there is a deficit in the government accounts, the Fed can simply print more money.

However, this in turn leads to higher inflation and weakening of the dollar, which is inversely related to inflation.

It is pretty evident that the body performing the functions of the American central bank is not in the best interest of the American public.

Its policies and actions are largely short-sighted at best, given the past experiences with our interest rate cuts and the subsequent hikes.

The financial crisis at hand puts into question the ability of the central bank in handling the needs of the contemporary American economy.

Thus functions of the American central bank should be in the hands of the people who should have a more effective hand in actual government, not privately-owned and run by the banking mafia.

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