Federal Reserve

The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States.

Criticism

Academic economists sometimes criticise the Fed's monetary policy, arguing that it has raised interest rates too quickly or slowly. Many economists agree that the Fed exacerbated the Great Depression by contracting the money supply.

Related Topics:
Economists - The Great Depression - Money supply

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Other criticism includes general criticism of central banking and fractional-reserve banking as well as criticism specific to the Fed. Austrian School economists criticize fractional-reserve banking in general. They argue that it leads to inflation and wealth redistribution.

Related Topics:
Central bank - Fractional-reserve banking - Austrian School - Inflation

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More controversial are theories that propound the idea that the Federal Reserve is was designed to transfer wealth from the American "people" to banks or other powerful groups. They say that it does this through inflation and monetizing government debt.

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Some critics argue that Congress does not have the constitutional authority to delegate to an independent agency its power "to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures" (Article 1, Section 8, Clause 5). Other critics say that the Federal Reserve System controls money through inflation, high interest rates, and taxation through the creation of liens and bonds paid for by U.S. citizens. Still others argue that the Fed supports large national banks over smaller regional banks.

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Finally, some believe that Federal Reserve is not neutral with regard to U.S. elections and tends to lower or rasise interest rates to benefit or harm certain candidates. This criticism is particularly directed at Alan Greenspan, who describes himself as an economic conservative and worked for Republican politicians. The Fed raised interest rates before the presidential election of 2000 and lowered them before the 2004 elections. However, it also lowered rates before the 1996 elections.

Related Topics:
Alan Greenspan - Republican - Presidential election of 2000 - 1996 elections

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