What is the Federal Reserve?

Many Americans believe that the Federal Reserve is a government owned organization that subject to the rule of government. This is couldn’t be further from the truth. The Federal Reserve is a privately held organization that is never audited or regulated by Congress or the President. How did this come about? From 1837 to 1863, the banking industry was unregulated and unstandardized. There was a lot of unethical practices and fraud. As a result, the Banking Act of 1913 was passed to "fix" this problem. What happened is that the money supply was turned over to private bankers. The Federal Reserve prints Federal Reserve Notes whenever it sees fit. This understandably doesn't create the best forex trading climate.



The money it prints is called fiat money as it based on confidence or authority. It is not based on a gold or silver standard. It is just paper, not worth anything it is printed on. So, they can print money whenever they feel it is appropriate. The influx of too much money in circulation causes the buying power of the dollar to lessen. When there is too much money, your money does not go as far. This is the problem today because forex trading tips the scales in favor of the central banks. The prices of goods have gone up and the wages have gone down.



If you are surprised to find out the Federal Reserve is a private institution, then you are not alone. Even though this entity is not regulated by the government, the board members are appointed by the President, but that is the extent of his power. When they take their places, they can do whatever they want without consequence. The only fair thing to do is to be able to audit them. It will only be at that time that citizens will truly be able to know exactly what the Fed does behind closed doors.



Rhab Hendrik is an author who shares his fx trading experiences with others. He can always be counted on to bring you the latest in forex training and detailed forex trading strategies.