Let’s Look at the Record

When the Federal Reserve was established in 1913, its main purpose was to prevent financial panics and runs on banks by acting as lender of last resort to the banking system. The Fed served this function by making loans to banks through the discount windows of the Reserve Banks. The Fed’s limited charter, along with the gold standard, minimized the central bank’s role in economic policy.
The Great Depression and the fiscal policy ideas of John Maynard Keynes prompted the government to take a more active role in managing the economy. After World War II, the Employment Act of 1946 required the federal government to “promote maximum employment, production, and purchasing power.” This act didn’t explicitly mention the Fed’s ...

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