Translator: Ghalia Turki. Validated: khalid marbou If you try to pay for something With a piece of paper, You might get into trouble. Unless it was that piece of paper One hundred dollar bill, of course. But what makes this banknote Interesting and more valuable Than other paper cutters? After all that, You can't eat it. You cannot build things with it. And burning it is actually illegal. So what's the big deal? Of course, you probably know the answer. The hundred dollar bill is printed by the government It symbolizes the official currency, While other paper cutters are not. That's just what makes it legal. On the other hand, what makes the hundred dollar bill valuable, Is her presence more or less. Throughout history, most currencies, Including the US dollar, It was related to the value of commodities And the amount of circulation Depending on government reserves of gold and silver.
But after the United States abolished this system in 1971, The dollar became known as paper money, This means that it is not related to any external source Instead, it relies solely on state policy Decides the amount of currency to print. So which branch of the state creates this policy? Executive, legislative, or judicial? The surprising answer is none of the above! In fact, fiscal policy is set By the independent Federal Reserve System, Or the video, It consists of 12 local banks In major cities around the country. It is a board of governors, Appointed by the President, And approved by the Supreme Council, Which reports to Congress, All of the gains from the independent Federal Reserve System go to the US Treasury. But to keep the Federal Reserve from being affected With the political fluctuations that take place from day to day, It is not placed under the control of any branch of the state.
So why doesn't the Federal Reserve decide Print just an infinite number of hundred dollar bills To make everyone happy and rich? Well, because the banknotes are then worthless. Think about the purpose of the coin. That is used to exchange goods and services. If the total amount of currency in circulation increases More quickly than the total value of goods and services In economics, Then each piece separately will be able to Buy a smaller portion of these things more than before. This is called inflation. On the other hand, If the supply of funds remains the same, While more goods and services are produced, Every dollar will be worth more In a process called deflation. So what's the worst between them? Inflation dramatically Means that the money in your wallet today It will be less valuable tomorrow, Which makes you want to spend it right away. So, while these might spur business, It may also encourage increased consumption. Or hoarding goods, such as food and fuel, Leading to higher prices Which leads to consumer shortages and more inflation. But deflation might make people They want to keep their money, And the decline in consumer spending It may reduce business profits, Leading to more unemployment The further reduction in spending, Causing the economy to continue to contract.
So, most economists believe that Too much of both is dangerous, Except that a fixed small amount of inflation Necessary to stimulate economic growth. The independent Federal Reserve System uses a large amount of economic data To determine how much the currency should be in circulation, Including previous inflation rates, International trends, And the unemployment rate. As in the story of Goldilocks, They only have to get the number correctly In order to stimulate growth and retain employees, Without allowing inflation to reach devastating levels.
It does not specify an independent Federal Reserve System Just the value of that paper in your pocket It also determines your chances of getting or keeping a job In the event that you get it..