Summary
The Federal Reserve’s influence on economic cycles, inflation, and poverty is critically examined, highlighting the need for greater transparency and accountability in its practices, as well as the debate over the necessity and effectiveness of central banking.
Federal Reserve’s Role and Impact
The Federal Reserve’s “lender of last resort” role enables fractional reserve banking through regulations and backing, creating an environment for bank risk-taking and malinvestment, driving business cycles and artificial booms.
Central banks’ primary concern is funding governments, especially for wars, not helping banks or employment, as evidenced by the Fed’s $35 trillion debt and need to manage excess supply at low interest rates.
Banking System Dynamics
Fractional Reserve banking poses a mismatch risk between deposited funds and available reserves, exposing banks to runs and crises if depositors withdraw funds simultaneously, leading to instability in the banking system.
Banks are not constrained by deposits or assets in determining loans, focusing more on politically influenced bailouts than depositors’ interests, relying on central bank intervention for survival.
Austrian Economic Theory
Austrian business cycle theory blames the Federal Reserve for monetary inflation and business cycles, remaining applicable despite changes in banking operations, as it focuses on the Fed’s enabling of fractional reserve banking.
Federal Reserve’s Recent Actions
The Fed’s unprecedented policies since 2008, including lending to corporations and buying mortgage-backed securities, are brand new and untested, with officials acknowledging uncertainty about their legality during the crisis response.
Click this link for the original source of this article.
Author: Bryan Lutz
This content is courtesy of, and owned and copyrighted by, https://www.thedailybell.com and its author. This content is made available by use of the public RSS feed offered by the host site and is used for educational purposes only. If you are the author or represent the host site and would like this content removed now and in the future, please contact USSANews.com using the email address in the Contact page found in the website menu.