The Federal Reserve was sold as a way to 'provide the nation with a safer, more flexible, and more stable monetary and financial system.' That's not what the central bank does.
The Fed eral Reserve was sold as a way to provide the nation with a safer, more flexible, and more stable monetary and financial system. That's not what the central bank does. In fact, the Fed destabilizes the monetary system by constantly interjecting itself into it, tinkering with interest rates, and creating money out of thin air to support government borrowing and spending. This leads to a broader destabilization of the economy manifested in booms and busts.
Once the apparent recovery takes hold, the Fed generally tries to tighten its monetary policy to keep price inflation under control. It ends QE programs and begins to nudge interest rates back up. When the recovery appears to be in full swing, the central bank may even shift to quantitative tightening — shrinking its balance sheet. During the boom, governments, consumers, and companies pile up enormous amounts of debt. Rising interest rates increase the cost of servicing that debt.
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