The Federal Reserve
What is the Federal Reserve?
The Federal Reserve System is the central bank of the United States. It was created in 1913 to regulate money. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve:
conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
promotes efficient consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, the administration of consumer laws and enforcement of money related regulations.
provides insurance on all bank deposits through the Federal Deposit Insurance Corporation (FDIC) to maintain economic stability
Types of Money
Money can be described as a generally accepted medium of exchange for goods and services. The technical term for the American dollar is "Federal Reserve Note." Money is characterized by its divisibility, meaning that it can be easily broken down into smaller amounts.
Virtually anything can be considered money, as long as it performs the three major functions of money (i.e. medium of exchange, store of value, unit of account). With this in mind, it is not surprising that there were different types of money throughout history.
Commodity Money: A good used as a medium of exchange that has intrinsic value in other uses
Fiat Money: A medium of exchange whose value derives entirely from its official status as a means of payment
Legal Tender: A legal medium of payment; this type of money can be accepted by decree of the government
Near Money: Financial assets that can't be directly used as a medium of exchange but can be readily converted into cash or bank deposits
The value of an item is determined by its unit of accounting.
If all money failed, society would revert back to a barter system of economy where goods and services were exchanged for other goods and services.
Important People in the Federal Reserve
Chairman
Vice Chairman for Supervision
Board Member
Source: FederalReserve.gov & Quickonomics.com