The Federal Reserve. L55

The Federal Reserve is a government regulation which allows the bank to lend excessively, but allow banks to borrow from the fed if they got into difficult circumstances. The Federal Reserve can force interest rates down to artificially low levels, so when business make extremely long term investments with the bank, the Consumer goods start going up. Then, the businesses see this and try to start to make short time money, but the problem with that is that the bank has to cancel out deals, and will eventually lose tons of money and go into recession. So to avoid recession, it is best to have no extremely low-interest rates in the first place.
Before the Federal Reserve was created, this is how money flowed:
Screen Shot 2016-11-21 at 3.05.23 PM.png
The Federal Reserve allowed and encouraged more money to be produced, so later after this is how the money flowed with the bank:
Screen Shot 2016-11-21 at 3.07.26 PM.png
I think that the Federal Reserve is not that great because it can cause recession among many businesses.
*THE PICTURES WERE TAKEN FROM THE RON PAUL CURRICULUM PERSONAL FINANCE COURSE
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