Cash is very important to the overall money supply, although that is definitely becoming less the case in this country. When I was a manager at my local Little Caesar’s Pizza, I was in charge of counting the money at the end of the day, and most of the time, over half of the purchases were made with credit/debit cards. The Federal Reserve has a certain amount of control over the money supply, which should technically only be limited by two other factors: the amount of money households chose to hold as deposits in banks, and the amount that bankers chose to lend. The only relationship between the Federal Reserve and the Government should be that the Fed was created through an act of Congress, but other than that, the Federal Reserve banks are essentially private corporations. How corruption might play a role in that system, however, is unknown.
If the FRB changes the money supply by dropping interest rates, this means they are looking for more economic movement because they may be seeing it slow down. I agree that it is one of the best tools they can use to boost the economy, especially in times like these when people are being laid off due to the virus and many aren’t spending their money other than on toilet paper and other “essentials”.
I don’t believe the FRB should have more accountability to congress; there’s a reason why it was created to be insulated from politics and it should probably stay that way. If Donald Trump had the ability to fire the Chair of the Federal Reserve, whoever got the job next would fear going against anything the President wants, assuming all that power to the President rather than themselves. We can see how this would quickly create a disaster full of corruption and many American people would be very angry.
Eli's blog 