Central Bank, FED, Congress discussed on Bankless
It was passed the legislation was passed democratically. Is that what happened? Exactly. So the senators involved in that had the job of codifying this thing of making it through law. And so in 1913, the fed was born through an act of Congress signed by the president. The 1913 Federal Reserve act. And that's what, by the way, creates this institution, there's no clause in the constitution for a Central Bank. There's no basis in that way. It is entirely an act of Congress. So the act in 1913 creates the fed, and then in 1935, during the new deal, there's kind of a rehash and update of the Federal Reserve act that did a lot of things and sharpened, like I said, centralized power in that committee, but yeah, Congress created and governs the fed. By the way, is this something that all countries have modern maybe democracies, a feature is like, I can't imagine a modern country existing without a Central Bank. Is this just sort of becomes table stakes? Was it at the time or was the fed sort of late on the scene? The U.S. getting its own Central Bank apparatus. Great question. The U.S. was a little bit late to the scene. The Bank of England Central Bank was around before the fed. And I am frankly not good on the history of other nations like advanced European nations or Russia in terms of when they sort of founded their own central banks. But I will say that as we sit here today, every nation that has an advanced economy has a Central Bank. And they all look different, of course, but the European Union has a Central Bank, England has a Central Bank, Russia has a Central Bank China has a Central Bank. It's a pretty core part of running an advanced economy. Well, it would be it's hard for me to imagine that a advanced economy or a nation competing internationally without some sort of currency, right? So at the time, of course, I'm not sure what the reigning 1913, the reigning reserve currency was probably the pound or something like this. It's certainly was not the dollar, but in order to kind of gain legitimacy and compete against other currencies of nation states for even reserve currency status, right? The unit of account for trade, for example, or unit of count for storing bonds on your balance sheet, then a country really needs a Central Bank in order to participate in an international economy. Of course, now the dollar has grown to be, I don't know, what is it like 70% or something? You know, of trade. It is the unit of account, not only for the United States, but for the world, but they probably weren't thinking with those types of aspirations in 1913, were they it was just a matter of let's make the U.S. banking system. The user experience for the economy a little bit better. And if we don't, things will fall apart. They weren't yet playing the world reserve currency game. That is absolutely correct. They created the fed to manage our own domestic affairs. It was cleaning house internally. And again, you know, we were an agricultural economy at this time. I mean, something like 70% of Americans earned a living through agriculture or some just gigantic number during this time. And finance lending and currency was critical to that business.