Wednesday, October 13, 2010

The Reason for the Fed

I randomly came across this today when I Googled "How does the Fed work". From the "How Stuff Works" site:
"There were even times when banks didn't have enough money to honor withdrawals by customers. Imagine going to the bank to withdraw money from your savings account and being told you couldn't because they didn't have your money! Before the Fed was created, banks were collapsing and the economy swung wildly from one extreme to the next. The faith Americans had in the banking system was not very strong. This is why the Fed was created."
Yep! Aaaaaand the Fed certainly fixed all that. Banks always keep enough money on hand to honor deposits, large numbers of banks no longer fail, the economy never swings wildly from one extreme to the other, aaaand Americans have great faith in the banking system. Yep! The Fed sure fixed all that.......

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