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The Federal Reserve Bank

The Federal Reserve Bank - of a huge amount of government...

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The Federal Reserve Bank: The central bank of the U.S., the Federal Reserve Bank (or ’Fed’ as it is usually referred to), is in charge of issuing all the currency of the country i.e. the Federal Reserve Notes. The commercial banks keep their share of bank reserves with the Fed. As the Fed is the clearing house i.e. the place where all the transactions between the banks can take place (say the clearing of checks), the commercial banks maintain a section of their required reserves with it. Now consider the Balance Sheet of the Fed. Any Balance Sheet would list the Assets on the left side and the Liabilities on the right. The Assets section of the Balance Sheet of the Fed consists
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Unformatted text preview: of a huge amount of government debt that is present in the form of U.S. government bonds . The U.S. Treasury issues these bonds in order to pay for the deficits of the present as well as past governments. Now the Liabilities section of the Balance Sheet of the Fed comprises of all the Federal Reserve Notes (U.S. currency) in circulation as well as all ’reserves’ held with the Fed, which are actually private bank deposits . An important thing to remember is that the Fed’s total liabilities will always equal its total assets....
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