The Federal Reserve System(联邦储备局）

Source By Mankiw, Chapter 27

此文帮助理解钱的源头！ 市面上流通的quatity of money是如何来决定数量的！

Whenever an economy relies on a system of fiat money, as the U.S. economy does, some agency must be responsible for regulating the system. In the United States, that agency is the Federal Reserve, often simply called the Fed. If you look at the top of a dollar bill, you will see that it is called a “Federal Reserve Note.” The Fed is an example of a central bank — an institution designed to oversee the banking system and regulate the quantity of money in the economy. Other major central banks around the world include the Bank of England, the Bank of Japan, and the European Central Bank.


THE FED’S ORGANIZATION


The Federal Reserve was created in 1914, after a series of bank failures in 1907 convinced Congress that the United States needed a central bank to ensure the health of the nation’s banking system. Today, the Fed is run by its Board of Governors, which has seven members appointed by the president of the United States and confirmed by the Senate. The governors have 14-year terms. Just as federal judges are given lifetime appointments to insulate them from politics, Fed governors are given long terms to give them independence from short-term political pressures when they formulate monetary policy.

Among the seven members of the Board of Governors, the most important is the chairman. The chairman directs the Fed staff, presides over board meetings, and testifies regularly about Fed policy in front of congressional committees. The president appoints the chairman to a four-year term. As this book was going to press, the chairman of the Fed was Alan Greenspan, who was originally appointed in 1987 by President Reagan and later reappointed by Presidents Bush and
Clinton.

The Federal Reserve System is made up of the Federal Reserve Board in Washington, D.C., and 12 regional Federal Reserve Banks located in major cities around the country. The presidents of the regional banks are chosen by each bank’s board of directors, whose members are typically drawn from the region’s banking and business community.

The Fed has two related jobs. The first job is to regulate banks and ensure the health of the banking system. This task is largely the responsibility of the regional Federal Reserve Banks. In particular, the Fed monitors each bank’s financial condition and facilitates bank transactions by clearing checks. It also acts as a bank’s bank. That is, the Fed makes loans to banks when banks themselves want to borrow. When financially troubled banks find themselves short of cash, the Fed acts as a lender of last resort — a lender to those who cannot borrow anywhere else — in order to maintain stability in the overall banking system.

The Fed’s second and more important job is to control the quantity of money that is made available in the economy, called the money supply. Decisions by policymakers concerning the money supply constitute monetary policy. At the Federal Reserve, monetary policy is made by the Federal Open Market Committee (FOMC). The FOMC meets about every six weeks in Washington, D.C., to discuss the condition of the economy and consider changes in monetary policy.


THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Committee is made up of the seven members of the Board of Governors and five of the 12 regional bank presidents. All 12 regional presidents attend each FOMC meeting, but only five get to vote. The five with voting rights rotate among the 12 regional presidents over time. The president of the New York Fed always gets a vote, however, because New York is the traditional financial center of the U.S. economy and because all Fed purchases and sales of government bonds are conducted at the New York Fed’s trading desk.

Through the decisions of the FOMC, the Fed has the power to increase or decrease the number of dollars in the economy. In simple metaphorical terms, you can imagine the Fed printing up dollar bills and dropping them around the country by helicopter. Similarly, you can imagine the Fed using a giant vacuum cleaner to suck dollar bills out of people’s wallets. Although in practice the Fed’s methods for changing the money supply are more complex and subtle than this, the
helicopter-vacuum metaphor is a good first approximation to the meaning of monetary policy.

We discuss later in this chapter how the Fed actually changes the money supply, but it is worth noting here that the Fed’s primary tool is open-market operations — the purchase and sale of U.S. government bonds. (Recall that a U.S. government bond is a certificate of indebtedness of the federal government.) If the FOMC decides to increase the money supply, the Fed creates dollars and uses them to buy government bonds from the public in the nation’s bond markets.
After the purchase, these dollars are in the hands of the public. Thus, an openmarket purchase of bonds by the Fed increases the money supply. Conversely, if the FOMC decides to decrease the money supply, the Fed sells government bonds from its portfolio to the public in the nation’s bond markets. After the sale, the dollars it receives for the bonds are out of the hands of the public. Thus, an openmarket sale of bonds by the Fed decreases the money supply.

The Fed is an important institution because changes in the money supply can profoundly affect the economy. One of the Ten Principles of Economics in Chapter 1 is that prices rise when the government prints too much money. Another of the Ten Principles of Economics is that society faces a short-run tradeoff between inflation and unemployment. The power of the FOMC rests on these principles. For reasons we discuss more fully in the coming chapters, the FOMC’s policy decisions have an important influence on the economy’s rate of inflation in the long run and the economy’s employment and production in the short run. Indeed, the chairman of the Federal Reserve has been called the second most powerful person in the United States.