The Federal Reserve System

"I assume that the purpose of this debate is to determine the validity and necessity of having a Federal Reserve System." Yes it is, though I will also be arguing that it is destructive to our economy. "Is the Federal Reserve Necessary? Yes, and for two reasons. First, it provides a physical infrastructure for the banking industry in the United States, upon which we, the citizens of this great Nation, rely upon in our everyday lives. Secondly, the Federal Reserve System controls the monetary policy of the United States, which effects the lives of all Americans, by controlling the value of the US Dollar, relative to the other currencies in the world." You explain what it does, but you are yet to tell me how this in any way benefits us. "Each Federal Reserve Bank provides a backbone of support for the banking system, keeps an eye on the financial institutions in it's region, and represents it's region in the meetings of the Federal Open Market Committee." If you understand that, you will understand why the banks have recovered, and nobody else has- Professor Richard Wolff University of Massachusetts; "Let's start with how the Federal Reserve Bank supports local banks. Each member bank in each Federal Reserve District keeps reserves with the Regional Bank. They (the Federal Reserve Bank) can provide emergency liquidity (for example, in the event of bank runs), and allow member banks to easily facilitating the movement of reserves to and from the different member banks as directed by ACH payments, Wire transfers, and customers writing checks." Well I see a problem, you are not rebutting me, you are just giving me this thing about how good the Federal Reserve is, that"s not a debate. "Secondly, the Regional Banks keep an eye on the members in its system, the bank holding companies, financial holding companies, federally chartered banks and state-chartered banks that are members of the system. Members of the Federal Reserve system must keep a certain amount of reserves with the Federal Reserve Bank and are monitored for compliance to safe banking laws and practices." "Lastly, the Federal Reserve bank CEOs participate in the formulation of monetary policy by taking part in and voting in Federal Open Market Committee meetings. The FOMC meetings decide what direction short term interest rates should go and what direction the Federal Reserve Bank thinks, based upon its constituents, long term interest rates should go as well. Essentially, the Federal Open Market Committee looks at the state of the economy and attempts to fine-tune and influence the direction the economy is headed." "Are people starting to behave too irrationally? Increase interest rates and sell government bonds to tighten the money supply. This will increase interest rates and make it more expensive for people to take out loans. Does the economy look a little sluggish? Let's inject it with a bit of caffeine and decrease short term interest rates. We'll also buy government bonds, put more money into the economy, making it easier for people to get a loan." "This, actually, leads us into our next topic, of how the Federal Reserve System manages the monetary policy of the United States." The second reason to have the Federal Reserve System is because it is necessary for the country to control its Monetary Policy. This is the setting of interest rates, the manipulation of the value of the US Dollar, relative to the rest of the world currencies, and managing the flow of capital in and out of the country. "There are two ways of managing a country's economy. The first is through Fiscal Policy and the second is through Monetary Policy. Fiscal policy is set by Congress when they determine tax breaks, subsidies, and legislative means for stimulating or condoning economic practices. It takes a long time to form and also takes a long time to enact, but is good for creating the bedrock upon which the economy is to be built." "On the other hand, Monetary Policy, being outside of the traditional legislative process, has the ability to quickly impact the economy. Monetary policy also effects the relative value of the US Dollar, which is important in a global economy where most major countries are debasing their currencies to increase their exports." And still you go with this, stop goofing off and give me a real debate. "If we did not have the Federal Reserve System, we would not have a banking infrastructure in the United States, nor would we have a way of maintaining our place in the global economy." Since when should we be concerned with some socialist"s economy, last I checked the government is here to help us, not the Swedes- that"s what the Swedes have their own socialist government for, rather than mooching on ours. I see you are having a