Truly a unique American feature: The Fed.

Vahe H Apelian

 

President-elect Donald Trump campaigned on the promise that his policies would lighten the financial burden on American households. But that most likely will not be so. It is highly unlikely that the prices in the grocery stores will be less, and house ownership will be more affordable as Trump administration entertains imposing punitive tariffs on goods produced in the Western advanced societies such as Canada and Europe, ostensibly to boost the post Covid domestic economy already going strong, according to economists. Consequently, more likely than not political clashes will be inevitable in the next four years  of Trump administration. 

Federal Reserves has become a convenient scapegoat and excuse to ascribe economic ills or fault it for ostensibly hampering economic growth, so nothing is new at the present,  even though Trump himself nominated its chairman to  lead the Feds. I quote, “The current chairman is Jerome Powell, who was sworn in on February 5, 2018. He was nominated to the position by President Donald Trump on November 2, 2017, and later confirmed by the Senate.”

Let us face it, the very reason the Fed is often attacked, criticized and faulted, is the very reason that Fed came about. 

In layman’s terms the Federal Reserve System, often shortened to Federal Reserve or Fed, is the central banking system of the United States. But, it is a conglomeration of independent banks and has no seating at the cabinet, simply because it is not a federal government institution. However, in a way it is the watch dog of a federal institution, the U.S. Department of Treasury, whose secretary has a seating at the Cabinet of the United States.

The government, who oversees the economy of the country, has a unique distinction, it can print currency and mint money. Too much of printing will cause an abundance of money circulating in the market and hence money will lose its purchasing power. The economists call it it inflation. Should the government not print enough money, there will be less of it and hence cause an escalation of the purchasing power of the printed money. The economists s call it deflation. In short, Inflation reduces the value of currency, but deflation increases it.

If we liken the government’s Department of the Treasury to Hoover Dam, then the Federal Reserve is its hydropower plant operating system that regulates how much  water is discharged from the dam to run the turbines and generate electricity to get the economy going without excesses, by discharging too much water, or too little water.  

In the enshrined concept of checks and balances that the founding fathers structured the governance of the United States of America, the Federal Reserve banking system is another lever.  In my view, the dollar, to great extent, owes its primacy to the Federal Reserve system, the independent banking congelation whose goal  is to assure healthy  market to make a buck,  the sacrosanct of the capitalist system. 

I read that Elon Musk, the billionaire  who appears to be given a free rein in the Trump administration to make the U.S. government more efficient, has a thing or two planned about the working of Federal Resave because it ostensibly is making the cost of running a business too costly and hence adversely affecting the economy.  Such arrogance should be the concern of every American, whether republican or democrat. All said and done, the bottom is the value of our hard earned money, be it Trump or Biden.

Note, I suggest those interested read a stamp collector describe how the Fed came about and what it does it by clicking on the following  attachment: https://info.mysticstamp.com/this-day-in-history-december-23-1913-2_tdih/?utm_source=tdih-398&utm_medium=TDIH-Email&utm_campaign=This+Day+in+History&fbclid=IwY2xjawHbBSpleHRuA2FlbQIxMQABHXij_Rtr6nHfkj-6kVgiKXcBdQONZv_wGv41FbCqy0mj5oqxQ1iWxcOnyA_aem_mOakztpq-Jjpv9nL5Fg5pw