Not Yet Fed Up with the Fed

The U.S. Federal Reserve System seems to be successfully leading the country out of the chaos of the past 12-months.  That’s cause for celebration, and CentralBanking.com has awarded the organization the impressive (but little-known) award of “Central Bank of the Year” for their actions in 2020.

While the Fed’s wizardry may seem deeply mysterious, business leaders should understand how the Fed works, as the Fed’s actions directly affect businesses in many ways, such as borrowing rates and the supply of labor.  For an excellent reminder of the Fed’s main functions, see this summary.

But how exactly did the Fed pull off the financial alchemy of the past year?  Axios relates the means by which the Fed took control of the economy including through interest rates, bond purchasing, and direct company financing.

And for a cinematic reminder of the importance of one of the Fed’s main functions, setting banks’ reserve requirements, see the bank-run scene from the movie “It’s a Wonderful Life”.

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