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Money & Central Banking
/What Gives a Dollar Bill Its Value?
/The Federal Reserve System

The Federal Reserve System

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The Federal Reserve System

Which branch of our government sets this policy? The Executive, the Legislative, or the Judicial? The surprising answer is: none of the above! In fact, monetary policy is set by an independent Federal Reserve System, or the Fed, made up of 12 regional banks in major cities around the country. Its board of governors, which is appointed by the president and confirmed by the Senate, reports to Congress, and all the Fed's profit goes into the US Treasury.

But to keep the Fed from being influenced by the day-to-day vicissitudes of politics, it is not under the direct control of any branch of government. Why doesn't the Fed just decide to print infinite hundred dollar bills to make everyone happy and rich? Well, because then the bills wouldn't be worth anything. Think about the purpose of currency, which is to be exchanged for goods and services.