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The Federal Reserve was created in the year 1913 after the Federal Reserve Act was passed. The purpose of this act was to create a central bank that would oversee all financial activity in the nation and which had the authority to print legal tender or currency notes.
The consequence of this was the Federal Reserve was a body that was given the ability to control the amount of currency in the economy and increase or decrease it as required by the prevailing circumstances. This is essential as the money supply needs to be regulated to maintain financial stability. The Federal Reserve was a means to prevent financial panics and it was available for the banking system as a lender of last resort in case of any emergency.
By its ability to control the dollars in the economic system: The Federal Reserve manages the nation's money supply to keep inflation low and the economy growing at a sustainable rate.
While the sales pitch to Congress was that the Federal Reserve would keep inflation low and the economy growing at a substantial rate, it was designed and has done the opposite. Since the Federal Reserve was established, and subsequently given more power, it has in fact kept inflation at a constant high rate. The previous century enjoyed little or no inflation to speak of. The Federal Reserve also made debt, not the economy, grow at a substantial rate.
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