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Finance: What is the 1913 Federal Reserve Act? 3 Views
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Transcript
- 00:00
Finance Allah Shmoop What is the nineteen thirteen Federal Reserve
- 00:06
Act Well for starters it created the Federal Reserve Thank
- 00:13
you Woody Wou okay So the Federal Reserve Act think
- 00:16
reserve of cash and or gold and or other securities
- 00:20
and assets that would serve to buffer volatile financial times
Full Transcript
- 00:23
is the US grew to become a dominant global power
- 00:26
Will the Federal Reserve is essentially the mothership of banks
- 00:30
or central bank as it is called in other countries
- 00:33
which is kind of the water spigot in the price
- 00:35
and velocity at which it loans money to sub distributors
- 00:39
of loans A US banking system Will the act divvied
- 00:44
up the country into twelve regions right here twelve each
- 00:49
with its own board of directors And then the Federal
- 00:51
Reserve itself has seven board members purposely an odd number
- 00:55
two Both reflect the personalities of the people and the
- 00:58
need for tiebreaking facility Well they are the FOMC or
- 01:02
funk or Federal Reserve's Open Market Committee who live under
- 01:05
strict rules regarding meetings held discussions had And what kind
- 01:09
of bagels tohave on the conference room table for Friday
- 01:12
morning meetings Remember that the country only fifty years ago
- 01:15
before this act was almost split in half with the
- 01:19
you know their existing a Yankee currency more or less
- 01:22
And a Confederate currency and then other regional currencies kind
- 01:25
of popped up around the edges and there was gold
- 01:28
and there was always that nerdy whole wanted to pay
- 01:31
in bitcoin So the Federal Reserve act unified the country's
- 01:34
currencies into one common currency the US dollar And under
- 01:38
that massive scale tons of efficiency in managing and leveraging
- 01:42
that money could be had And in doing so the
- 01:45
US dollar became almighty It was the global standard currency
- 01:48
of choice And it also let banks catalyzed the American
- 01:51
dream at least in America by virtue of their ability
- 01:55
to grant mortgages right like most of the wealth in
- 01:58
this country is stored in homes people own So yeah
- 02:01
it's all powerful stuff in a world where the common
- 02:04
man you know for Millennia before had never dreamed of
- 02:07
actually owning his own castle no matter how small it
- 02:11
wass Well one tool that the Fed then used was
- 02:14
to basically say to banks We literally give you a
- 02:17
license to print money and it's okay Hey that you
- 02:21
make a profit but you have to live by our
- 02:24
rules But if you do you you know make bank
- 02:28
Yeah well that's probably where the term came from Well
- 02:30
it was that ability to print money that became the
- 02:32
central weapon the U S government then used to manage
- 02:35
the economy I'ii stimulate her giggity when she was cold
- 02:39
and cool her off when she was you know inflation
- 02:42
e Well the Fed created what is called a discount
- 02:44
window where banks line up to buy discounted money or
- 02:48
credit They mark it up and then resell it Tio
- 02:50
cash thirsty Joe six packs all around the country so
- 02:54
inside of each of the twelve regions of a bank
- 02:56
wanted to be a federal bank I live under the
- 02:59
rules of the Fed so that they got cheap U
- 03:01
S dollar backed loans from the Fed which they would
- 03:04
then mark up and sell Joe Consumer who wanted to
- 03:06
buy a home or a mule or a butter churn
- 03:08
or two thousand Well then they had to have skin
- 03:11
in the game That is the regional banks had to
- 03:13
go raise their own capital like you know asking grandmama
- 03:16
for money or raising it from a consortium of shareholders
- 03:19
who would then buy in or invest that capital as
- 03:22
part of their commitment to the long from establishment of
- 03:24
credible banks in the region That investment wasn't sellable or
- 03:29
transferable and the cash they invested well paid no interest
- 03:33
That quote gift unquote of no interest was kind of
- 03:36
a sign that well of their you know financial commitment
- 03:40
to the partnership would grow and do well is an
- 03:43
asset Our investors would lose everything and note the word
- 03:46
incredible Here It means believable trustworthy honest Well it doesn't
- 03:51
take much letter tweaking to make that word credit Credit
- 03:55
tha bull and yeah that's where all these turns to
- 03:57
write So who made all this happen Who made it
- 03:59
up Who implemented Well if you ever get a chance
- 04:02
to see Hamilton Hamilton the stage play not the TV
- 04:05
commercial for bulk pig meat see it You may have
- 04:08
to take out a bank loan You know just buying
- 04:11
but cheap tickets here That's what we're hoping for Yeah
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