Wednesday, April 24, 2013

How The Federal Reserve System Really Works [Infographic]

So, it might be a couple of read-throughs of this infographic before you really grasp all the subtleties of the Federal Reserve System. Despite its claim, this is not a particularly “visual” guide. However, I think it neatly sums up many of the questions asked about the Fed through text. Basically, the Federal Reserve’s duty is to keep inflation balanced and in a state of not growing too much or too little. While this is almost impossible, it is mostly achieved through setting the federal funds rate, a very important task. Unfortunately, the Fed relies on the judgement of humans, and therefore is not a foolproof system at all. While the Federal Reserve may be irksome at times, it is important to recognize that the nature of the system is meaningful and well intended. Banks need money. The government needs money. The Federal Reserve regulates this money. When you boil it down, these are the basic things that the Fed does, and everyone should be aware of its purpose. 

In the end, the Federal Reserve should not be looked upon as the bad guy. It’s just the middle man trying to make sense of the millions of expenditures that banks and government do everyday.

For the rest of the story:

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