http://www.maxexchange.com/ybj/chapter_1.htm

I found this online book I wanted to read about the Fed, but it seems kind of bias so I'm a bit wary if all the information is correct. I'm interested in how the Federal Reserve operates and why it has the power is does though.

Anyone have any good links or internet references about it?

Before we even proceed, I must warn you to stay the hell away from that website. It's fiction - Illuminati conspiracy theory stuff. As in, the same category as the 9/11 conspiracy stuff.

Okay, I will.

But the site does say that the Fed is a private corporation, which I think is a little odd. As far as my understanding goes, capitalism would allow people (and people who own banks) to make their own money. But the Constitution says only Congress can control the money supply. That could be easily amended though.

As you should think it's odd: it's a total fiction.

But what makes the distinction in this case? I'd say it wasn't private because it was made by Congress and the President still appoints the employees of it.

Sigh, swim through the USC Title 12... Chapter 3 covers the Fed.

Link!

Thanks for the link, but whoa! This is going to take a long time to make sense of :o .

Don't feel bad, its not supposed to make sense.

Anyways, by the Fed's own admission, they don't really matter that much anymore.

And what they can do is more harm than good, obviously.

In other news:

Two different types of protection racket.

So the Fed doesn't have as much influence as it is supposed to... or is the private sector just smart enough to get around the hampering?

I know the raising and lowering of interest rates affect the strength and weakness of the economy; which means that certain stocks are better at certain times aka -- the business cycle.

Which, I guess thos puts investors at a good spot because they can see the "waves" coming. Put I think that's just the principle here.

Business and capital flow around the conditions set for them.

It works better the freer it is to move, but if it's restricted... it just adapts -- like water.

Ehhh... maybe i'm just confused. :blink:

I think the instruments they use don't behave in quite the same fashion as they are used to, and that this, along with mistaken assumptions regarding the origins and significance of certain economic activity, frustrates their attempts.

Also, the private sector is most emphatically NOT smart enough to wholly evade the unavoidable consequences of Fed policy.

As an example, observe the yield curve for the last few months. Interest rate targets along with purchases of government securities are one of a couple of tools that the Fed uses to manipulate the price of debt, and thus bond yield prices are heavily influenced by Fed policy and activity.

Investors waited for interest rates to drop while the Fed held them steady. Then began a sort of standoff, until investors (in my opinion, correctly) began to think perhaps they would in fact rise.

Rates effect the price of debt and thus loosely, the amount of lending and borrowing. When low, the risk exposure of debt to other forms of investment is lower, and thus standards tend to lax, when too low for too long inflation begins to set in, and usually the Fed reacts by raising them too high too fast. This has the effect of altering abruptly the risk associated with the debt in relation to the value of the collateral. It also makes borrowing more expensive. From this, all else follows. The business cycle is in fact a fiction created (inadvertently, for the most part) by Fed policy and Wall Street anticipation and reaction to said policy.

If only.

Depending on the obstacles, it can come to resemble white water rafting.

And so it is that capital can be directed in disastrous directions, as institutions are forced to choose between Scylla and Charybdis, to preserve your metaphor.

We've been going over the Fed for two weeks now in Economics so I can say my understanding is a lot more complete then it was.

For starters I figured out why the Fed, despite what everyone on the Internet keeps claiming, is not a private company. It donates all of it's profits to the government, essentially paying off the debts by printing money.

It might not be controlled "democratically", but it's operations aren't used for the profit of private individuals and reinvested into the company and the economy.

It might look similiar, but it's an entirely different beast.