Federal Reserve System

The Federal Reserve System is the central bank of the United States, created by the Federal Reserve Act of 1913. It comprises a Board of Governors in Washington, 12 regional reserve banks, and the Federal Open Market Committee, which sets interest rate policy at eight scheduled meetings a year. Congress has assigned it a dual mandate: stable prices and maximum employment.

Why it matters

Because the dollar anchors global finance, the Fed's decisions set the price of money for the world. It steers short-term rates, expands or shrinks its balance sheet through quantitative easing and tightening, and acts as lender of last resort in panics, a role it exercised at historic scale in 2008 and 2020, when its balance sheet grew from under $1 trillion before the financial crisis to near $9 trillion at the 2022 peak. Every asset's valuation embeds an assumption about Fed policy, and its inflation record, including the 9.1 percent CPI peak of June 2022, is the standing measure of how well discretionary money management works.

In the gold vs bitcoin debate

The Fed is the institutional foil for both assets. Gold is the money the Fed's dollar replaced, its last formal link cut in 1971, and gold's price has historically responded to expectations of easier policy. Bitcoin was launched in 2009 as an explicit alternative to central banking, with a supply schedule that substitutes code for committee judgment. The comparison between gold and bitcoin is, at bottom, a comparison of two ways to opt out of the same institution.