Who is “the Fed” and why do they raise and lower interest rates?
The Fed refers to the exalted “bank of banks”; the central bank of the United States and the bank of the federal government, otherwise known as the Federal Reserve. The Fed was created in 1913 to organize, standardize, and stabilize the monetary system. Before the Fed was created, almost anyone could issue currency, even a corner drugstore. It wasn’t uncommon for banks to collapse, or for the economy to swing wildly between extremes. One of the Fed’s missions is to maintain stable prices (or maintain inflation at a rate that doesn’t affect business or household spending), which promote economic growth and maximum employment. The Fed uses a number of methods to achieve this goal. Its most prominent one is the raising or lowering of inte
