Federal Reserve Debate

History and Debate of Federal Reserve

The Federal Reserve is the central banking system for the United States of America. Also known as the Fed, this system was created by Congress in 1913 under the Federal Reserve Act. Congress set out three key goals for the Federal Reserve: moderate interest rates, stable prices and maximum employment. Read on to learn about some of the pros and cons of the Fed.

Pros to the Federal Reserve Debate

There are many pros to the Federal Reserve. First, the Federal Reserve established a national currency. Prior to the Fed, there were over 30,000 currencies in the USA. The Federal Reserve made a singular currency valid throughout the country. Next, the Fed protects small banks. Without the Fed, larger banks would have a great deal of power over small banks, potentially causing them to fail. The Fed helps to control inflation and deflation, keeping the country running smoothly in terms of finances.

The Federal Reserve helps to represent America and its financial interests. Without the Fed, the interests are represented by banks, clearly not the healthiest financial option as banks are concerned about private rather than public interests. Lastly, banks are required to undergo an impartial, outside audit done by the Federal Reserve. If the Fed did not exist, all audits would take place internally, causing corruption among the banks.

Cons to the Federal Reserve Debate

There are also many cons of the Federal Reserve. The Fed has undergone a great deal of debate since it was created over 100 years ago. The Federal Reserve is primarily protested by those from political parties supporting a small federal government, although protests are found across all political lines. The primary reason the Federal Reserve is disliked is due to the fact that it is considered unconstitutional and invasive. The institution is often regarded as anti-capitalism, because finances are controlled by a big, government organization rather than a group of privately run businesses. This expands the size of the government, a con for many individuals.

Another con is that the Federal Reserve is often cozier with private interests than public interests. Lobby groups and private interest groups can exert a great deal of influence over the Fed. This takes away from the rights and well-being of the public, allowing individuals to benefit over the benefit of the whole. Lastly, the Federal Reserve, while it is a government institution, is still run by an individual with a business-like mind. This opens the Fed up to a great deal of corruption and leads to further choices of private interest over public interest.

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