Corporate Finance

Today, and more than ever before, there is something which is crystallized in the public mind, something vast, something existential, something in which people revolve around in the same manner the earth revolves around the sun. Essentially, living without it is beyond reason and we are compelled to coexist. This entity, in a given socio-economic context, can act as a form of payment in exchange for goods and services. Namely, this entity is devised in the shape and form of money. In the world, the most dominant and recognized form of money is that which is backed by the United States government and is liquidated by the United States central banking system, formally known as the Dollar. Taking on proportional responsibilities as the “father” of the world currency, the issuing of the dollar should be held to the highest standard to insure that it is properly, ethically, morally and efficiently supplied. However, fundamentally, is that the case? How does it come to exist? Do we know? Understanding our monetary policy is the key to understanding why our lives have assimilated in such a way and how we have built and adjusted societies around it. It is obvious that the Federal Reserve, without question, is one of the most imperative institutions instilled by the United States government, for it holds the power to print and issue legal tender. Ergo, the revelation of money creation as is utilized by the Federal Reserve will be put on trial on the allegation of two central questions. If the Federal Reserve is vindicated, its system of money creation stands credible and fit to continue its practice. The two questions the Federal Reserve must withstand are as follows: Ever since the establishment of the Federal Reserve in 1913 and abandoning the gold standard in 1971 (Nixon Shock), inflation has been increasing and the value of the dollar decreasing.