Most Americans assume the U.S. Federal Reserve is a powerful government institution that seeks only to safeguard the dollar, boost the economy and drive employment higher.
That's what the Fed wants you to think.
The illusion of the Fed as a stabilizing, positive government entity has more or less existed since its creation under dubious circumstances in 1913.
"It not only avoided the word bank, it cleverly implied federal, or government, control over the establishment of a pool of reserves that would backstop the new banking 'system,'" said Money Morning Capital Wave Strategist Shah Gilani.
Congress has played along the whole time, first by approving the legislation that created this beast and later by endowing the Fed with its "dual mandate" to combat both inflation and unemployment.
The real reasons the Fed was created, and many of the things it does to this day, would shock many Americans.
"If the American people truly understood how the Federal Reserve System works and what it has done to us, they would be screaming for it to be abolished immediately," Michael Snyder writes on his website, The Economic Collapse.
Five Shocking Facts About the Federal Reserve
1. It's Not Really Part of the Government
Few people realize that the Federal Reserve didn't even exist until about 100 years ago. It was cooked up by the top Wall Street bankers of the time in a secret meeting on an island in Georgia (A book about it is actually titled "The Creature of Jekyll Island.")
The bankers wanted a central bank partnered with the government to serve as a backstop for their institutions, which then were prone to panics and bank runs.
The 12 regional banks that make up the Federal Reserve are not owned by the U.S. Treasury, but by the nation's private banks. According to Factcheck.org, "about 38% of the nation's more than 8,000 banks are members of the [Federal Reserve] System, and thus own the Fed banks."
2. The Federal Reserve's Primary Purpose is to Serve the Banks
While the stated purpose of the Federal Reserve is its congressional "dual mandate," in practice serving the needs of the big banks still comes first.
"Central banks – of which the Federal Reserve is, by far, the world's largest and most powerful – serve banks first and foremost," Gilani said. "Secondly, they serve their host governments. They are the ultimate tool of the rich and powerful."
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.