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The Federal Reserve Bank was established to be insurance against any future financial
panics. Serving as a lender for last resort stations. The Federal Reserve Bank also
controls the money supply by multiple ways.
One way the Federal Reserve Bank manages the control of money is through the
reserve ratio. Even though it isn’t used often this method is an extremely impact
method. The reserve ratio is a percentage amount of the reserves a bank must keep
when deposits have been made. When there is a decrease in the ratio this will allow for
the bank to lend more. However, an increase in the ratio will cause the bank to lend
less. Another way the Federal Reserve Bank can control the money supply is by the
discount rate. This happens when the central bank charges the commercial banks that
are in need of bowing additional reserves. This rate is set by the Federal Reserve Bank
and not by the market rate. Now if the Feds want to give banks more reserves it has the
ability to do so by reducing the interest it charges. On the other hand it can generate
more reserves by raising the rate and convince the banks to reduce borrowing. The
Federal Bank Reserve can control money supply by the buying and the selling of
government securities. When the Fed buys back the issue securities from large banks
and security dealers they in return are increasing the money supply for the public. Now
the act of selling off government securities will result in the opposite effect. It doesn’t
appear that the Federal Reserve Bank believes that money is God’s property. The Feds
ability and the power to inflate the money supply at will. Creating money magically may
create more money but that doesn’t mean more spending is going around just means
someone loses. If it was God’s property the focus would be not have the Feds as a
monopoly but to know Christ is sufficient and that to trust the he gives us more than
enough.
