What Is The FED

The lesson covers four objectives, namely, what the Fed is, its mission, how it changes market conditions with interest rates, and what it tells us about Mr. Market. The Fed is the United States Federal Reserve that manages the US currency and controls the economy. It was created in 1913 to bring stability to the country as prior to that, different governments could issue currencies, leading to unrest. The Fed aims to maximize employment, stabilize prices, supervise and regulate banks, maintain the stability of the financial system, and service the debts for the US federal government. The Fed stabilizes the financial system by adjusting interest rates to affect people’s spending habits. When interest rates are high, it’s best to buy bonds, whereas when they’re low, it’s ideal to invest in stocks. The art of asset valuation involves relatively comparing a stock versus a bond to determine the right investment.