The History of The Federal Reserve | How Does the Fed Work?

Описание: The Federal Reserve System was created by Congress over a century ago to become the central bank of the United States. President Woodrow Wilson signed into law the Federal Reserve Act in December of 1913. Prior to the Fed being created, the United States economy suffered through numerous episodes of bank failures, panic, and scarcity of credit. The purpose of the Federal Reserve was to stabilize the bank industry and the economy during turbulent times. As we look through history, we can see the need for this stabilizing force in our economy. This History of the Federal Reserve shows us what exactly happened and how the Fed works.

In earlier time, American colonists had been limited to using coins from Europe, to bartering, and commodities as a means of exchange prior to claiming independence from British rule. They were constantly troubled by shortages of foreign coins and countless inefficiency with the barter system as well as commodity money. Several colonies starting minting their own coins and creating their own paper money at end of the 17th century. This was terribly ineffective. People had no faith in this colonial currency, not to mention the constant interruption by British rulers.

The fact is that colonial banks are nothing like the modern banks of today. They didn’t take deposits from customers or issue loans. Instead, they handed out paper currency that was backed by either land or a precious metal like gold. Merchants and other wealthy individuals were the main source of credit in those days.

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