How The Federal Reserve System Really Works [Infographic]

April 24, 2013 |  by  |  Government

So, it might be a couple of read-throughs of this infographic before you really grasp all the subtleties of the Federal Reserve System. Despite its claim, this is not a particularly “visual” guide. However, I think it neatly sums up many of the questions asked about the Fed through text. Basically, the Federal Reserve’s duty is to keep inflation balanced and in a state of not growing too much or too little. While this is almost impossible, it is mostly achieved through setting the federal funds rate, a very important task. Unfortunately, the Fed relies on the judgement of humans, and therefore is not a foolproof system at all. While the Federal Reserve may be irksome at times, it is important to recognize that the nature of the system is meaningful and well intended. Banks need money. The government needs money. The Federal Reserve regulates this money. When you boil it down, these are the basic things that the Fed does. That’s not to say that there are countless other things that consist within their system

In the end, the Federal Reserve should be seen as the middle man trying to make sense of the millions of expenditures that banks and government do everyday.


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  • Roshan Reilly


  • Ali

    wow… Bernanke would hire you guys & pay you a lot for this loathe of crap.

  • John Cram

    Reminds me of the kids that feel they are strong in physics since they are able to recite E=mc2.

    First they cannot even tell you what the variables are (E,m,c)
    Second, thinking that it all boils down to just one equation, well even more comical.

    Why not do a visual on “who decides how much money to PRINT” that would be insightful.

  • nkms

    Key point missed: Money that is given out to the U.S. from the Fed is owed back to the Fed with interest… this model means that as long as the U.S. acquires money from the Fed, the U.S. will always be indebted to the Fed… OP, keep your low-brow propaganda to yourself please, kthx.

  • Michael Rudnin

    This is only a third of the story. They’re missing the part about the fractional reserve banking system, as well as how inflation over time debases the dollar’s buying power.

  • HTC

    I like the first image “NYSE falls 50% in 1907″

    Funny… the DJIA fell over 50% in 2008, and the government bailed out all the insolvent banks and corporations.

    They should include an infographic of the past 100 years, where the dollar has lost 90% of it’s purchasing power.

    “Too Big Too Fail” is NOT indicative of capitalism and it’s not at all possible without centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly. (the 5th plank of the Communist manifesto, the EXACT description of the Fed this infographic provides).

  • James

    Watch the movie Zygiest, this is a load a crap.

  • Whoever

    This article was written while I was sitting on Ben Bernanke’s C***.

  • Chauncy

    How did Eric Lyday (Lie-Day) have time to write this article. Seems like he’d be pretty busy chompin’ on Bernake’s twigs & berries. lol

    This article really suxxx!

  • ColdWarBaby

    “…it is important to recognize that the nature of the system is meaningful and well intended.”

    I simply will not read any further.

  • Jeremy Hughes

    I read the author’s intro, and skipped the rest. What a schill piece of fuckin shit. FUck you OP, sorry, but from someone htat has studied monetary policy, banking systems, and how Government is SUPPOSED to print it’s money, I gotta say “you’re full of shit you fuckin cock bag” Suck a dick and die slow you fuckin idiot, the federal reserve bank has killed 2 of our most beloved presidents and helped the republicans take over the world. FUCK YOU.

    I’d beat your fucking ass in the street if i ever saw you piece of shit misinformation government paycheck fuckin goon.

    • Alex Hall

      This is an unbelievably abusive and foul comment, and that six people have upvoted it fills me with despair.

  • NoSir

    Once again, the anti-Fed faction proves themselves eloquent, thoughtful and convincing (Sarcasm, if you couldn’t tell.)
    I am not an economy major, nor a history major, and this infographic makes more sense than anything I’ve seen you guys spout here or in any of your other circlejerks.

  • RobtheWhat

    Hunger? Child Brides? Human Trafficking? The list is long.

  • Branden Silva

    If there is indeed a way to control the world it would be by setting yourself up to control the money supply by being on the board of directors of the federal reserve. Then when things go wrong, your private bank (who was just as greedy as the non-controlling banks) can bail themselves out and let others fail. By the way, didn’t Woodruff Wilson later regret implementing the Federal Reserve System?

    While I understand the government needed some form of liquidity to fix the turbulent economy back then, it still stands to reason that the federal reserve has increased the money supply so much that the dollar has lost over 90% of his its value since its inception. It also stands to reason that the government could possibly govern its own money if it was setup properly to do so without private hands in control. Then its at least accountable to the people for major decision making, bail outs, etc.

    Typically in capitalism, if one business holds all the power and dominance we call it in a monopoly. I guess we are supposed to forget that knowledge when we refer the Federal Reserve. It might consist of the 12 central banks, but those banks dominate the landscape of banking and control the million other banks out there. It’s too high of a concentration of power just like the government is too overly concentrated in representing the people as well.

    Most of us who have worked hard for savings, can never really keep up with the value of money and gain an advantage to those who sit at the top of the banking throne.

    You often hear them say “Well we are only rising 2% inflation per year. That’s not so bad.” but in 10 years thats 20% of money losing its value from being diluted. No longer does your wallet feel so nifty holding that 10 years of saving when services and products go up in price to compensate for their money diluted losses as well.

  • ACDC

    I dont appreciate this illustration patronizing me.

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  • Jay

    Wow, Eric Lyday, you truly have no understanding of how the Federal Reserve works.

  • Gerald

    Absolutely absurd. ANYBODY WITH HALF A BRAIN CAN REALIZE THE FEDERAL RESERVE PERPETUATES POVERTY! The Federal Reserve is the reason why there is debt in our economy… because of loans, not created by Congress, as Article One, Section Eight describes in the Constitution! Congress must coin money it states, not a private, central bank!

    • Alex Hall

      The opener “ANYBODY WITH HALF A BRAIN” is needlessly aggressive. It implies that everyone who disagrees with the commenter is very unintelligent. Ironically, that’s a really stupid thing to say, because it is simply and demonstrably false. Never mind the ways that it’s stupid to verbally attack strangers, period.

  • Jason marsich

    please go elsewhere to read about the fed.

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  • Mark B

    Having a relative that worked over 12 years with the Federal Reserve Bank of Boston . . this acticle is pretty much spot on. These conspiracy theory’s do get better with time. Thanks for the entertainment however.

  • speed 6

    If you have a better idea on how to run the banking system, please make some suggestions. Do you really think you would have a better life without this system. If so its because you want a good life without working for it, you want someone else to do the work for you while you live the good life which means more poverty and would suck this country dry even faster. the only reason we haven’t collapsed or had another cival war is because of the Fed. I was ignorant too.

  • ggg


  • maestro

    its seems like everyone hate you man! however thank you for introducing us to the STRUCTURE of the FED. Great explanation (lets leave the advantages and inconvenient for the next topic).