The U.S. Federal Reserve is one of the most powerful financial institutions in the entire world.
So why do we know so little about it?
The Federal Reserve creates policies that hugely influence the American (and the entire world's) economy.
But the Fed's been criticized for lacking in transparency and accountability, and for the fact that the highly influential officials in its branches are appointed rather than elected.
Allowing a private central bank to manage the money supply isn't supported by the U.S. Constitution.
Even if we ignore the Constitution, the ability for a private institution to set public financial policy is a massive conflict of interest.
The public has no say in how the Fed is run or who operates it, which makes a lot of people understandably uncomfortable.
After we take a close look at the facts, you'll probably feel uncomfortable with the Fed and its powers too.
The Federal Reserve's Assets
The Fed's total assets have quadrupled since 2007
The Federal Reserve is a private, centralized bank owned by 12 other major national banks.
It was set up in 1909 to prevent financial collapses.
With more and more frequency, banks were experiencing "runs" that drained them of their currency and capital.
As a solution to that problem a private, centralized national bank was collectively set up by the banks to put funds in reserve in case they were needed to prevent an economic meltdown.
The Fed came in very handy during the 2008 financial crisis, lending money to some financial institutions to pull them through or to purchase others that were on the brink of failure.
It's no coincidence the banks more than quadrupled the amount of assets held in reserve at the Fed since 2007.
Back in 2007, the assets held at the Federal Reserve totaled $922 billion.
Just one year later, in 2008, the total assets had been more than doubled to $2.239 trillion.
Between 2012 and 2013 alone, the total assets in the possession of the Federal Reserve jumped 37% from $2.917 trillion to $4.023 trillion.
At the end of 2017, the Fed's assets totaled $4.448 trillion.
Considering the entire U.S. GDP was $19.39 trillion in 2017, that's a staggering amount of money for a central bank to control (even for the world's biggest economy!).
Currency in Circulation
Total currency has risen gradually
The Fed doesn't print currency – that's the job of the United States Department of the Treasury.
The Fed does, however, manage the supply of U.S. dollars in circulation both in the form of hard currency (bills and coins) and available credit from banks.
With so much control over how much money is available for people and companies to borrow and spend, the Fed influences everything from borrowing and investing to overall economic growth.
Interestingly, although there has been a huge and rapid increase in how much money the Fed holds as assets in its reserves, over the past decade the increase in the amount of currency in circulation has increased much more gradually.
In 2007, the total U.S. currency in circulation was $829 billion.
By 2010, currency had surpassed the trillion-dollar mark for the first time, hitting $1.020 trillion.
In 2017, currency in circulation had increased to just $1.616 trillion – nearly double what had been in circulation ten years earlier.
Deposits by Other Banks
Not all of the Fed's assets belong to the Fed
Another factor influencing the growth in the total assets being controlled by the Federal Reserve has been an increase in the amount of deposits other banks have placed in the Fed as backup.
This has created a higher available reserve balance for the Fed in the era after the financial crisis of 2008.
In fact, back in 2007, the total deposits of depository institutions (banks and other financial corporations) was only around $17 billion.
By the end of 2008, the amount of money other institutions had placed under the control of the Fed had jumped by more than fifty times the 2007 amount to $860 billion.
Then in 2013, it hit a peak, closing the year off with $2.45 trillion in funds deposited by other financial institutions.
By 2017, the total deposits of depository institutions being banked with the Fed was down slightly to $2.208 trillion.
With a definite link to the data for the Fed's total assets, the amount of money other institutions have deposited has increased dramatically since the 2008 crisis.
What that means is the power of the Fed has increased significantly in the past 10 years.
Both members of government and civilians have become even more fearful its influence is too great on the American economy (and not necessarily in the best interests of the country).
The Fed and Public Opinion
Americans are lukewarm or clueless
Gallup conducted polls among Americans to determine their opinions on the Fed and its performance in 2017, and the results indicate people either think it's doing just OK or have no opinion at all.
When asked the question "How would you rate the job being done by the Federal Reserve Board," only 8% of U.S. respondents thought it was performing "Excellent."
41% of the survey participants said they thought the Federal Reserve's Board was doing a "Good" job, while 28% said it was doing a job that was "Only Fair."
8% of Americans thought the Federal Reserve Board was doing a "Poor" job in 2017.
But perhaps the most telling statistic was that 16% – one in six Americans – didn't have any opinion on the Fed's management.
One in six Americans doesn't have any idea whether the Federal Reserve is doing a good job or not, which illustrates the Fed's ongoing issues with a lack of accountability and transparency.
The fact is, data from a Cato Institute Survey in 2017 shows that exactly half (50%) of all Americans have heard of the Federal Reserve but don't understand everything it does.
Another 22% of Americans have heard of it but don't understand anything about what it does.
6% have never even heard of it, and 2% don't have an opinion at all.
Which means that among all Americans, only one in five (20%) know what the Federal Reserve is and believe they understand its function very well.
The Fed has grown in power (but not in public understanding)
Our entire economy is under the control of a private, centralized bank that determines our currency flow and monetary policy.
You don't get to vote for any of the people who run the central bank or the 12 banks that own it.
And the vast majority of Americans don't know exactly what the Fed does, or why and how it does it.
These statistics have shown that while the power of the Fed has increased dramatically in the decade after the financial crisis, our understanding remains hazy.
Feeling uncomfortable yet?