We're here at the Museum of American Finance. We're here with Maura Ferguson. She's going to show us around the exhibit, "100 years of the Fed." Maura, shall we go take a look?
The "100 Years, 100 Objects" exhibit shows off 100 items from the Central Bank's history of guiding monetary policy in the United States. The exhibit features an audio component where museumgoers can hear stories behind the items in the words of the Fed employees as they remember them. One of my favorite items in the exhibit was an unassuming piece of lumber, which made its way into the hands of the Federal Reserve Chairman of 1970's.
There was very high inflation at the time and interest rates were going up, and so the construction workers, there was not a lot of new construction, and so they sent their lumber into Paul Volcker because they said we can't use it right now. So he got a lot of those on the doorsteps, so that was kind of an interesting story as well.
And the significance of Paul Volcker is he gets credit really for breaking the back of inflation. Of course, we have runaway inflation in the 70's and early 80's, and it was the Volcker that raised interest rates very aggressively in order to tame inflation. And we've been blessed with 30 years of declining and now very low inflation as a result of those efforts.
Maura showed me some items that represented simple office life in the Fed throughout the years, and some items that represented its crowning achievements.
If you're not entirely sure what the Fed does, stop by the System Exhibit to check out the offices of many key positions in the Federal Reserve and learn more about why the Fed is so important to your pocketbook.
So what we've done is to recreate the offices of what maybe they look like, we don't know, of different roles of the Fed and so people can see what each of those people do, and in the process, learn a little bit about how the Fed works.
Now this is the Fed Toolkit, which really explains what options the Fed has at their disposal to keep our economy moving. For example, what most people are familiar with, are open market operations. This is the Federal Open Market Committee, and the actions they take to guide interest rates. Reserve requirements: this is another tool through which the Fed can govern the money supply. If they increase the amount of reserves banks have to maintain, they're pulling money out of circulation. With the same token, if they ease those reserve requirements, it's a great way to get money into the system and revive what might otherwise be a sluggish economy. And then, perhaps the least known is what's known as the discount rate. Of course, the Fed is the lender of last resort. In other words, when banks need cash, if they can’t borrow from another bank, they'll come directly to the Fed. That’s the discount rate, the rate at which they pay the Fed to borrow directly from that.
Well, I'd like to thank Maura Ferguson and the Museum of American Finance for hosting us and showing us through the exhibit, "100 Years of the Fed." The exhibit will be on display through September 30 of 2014. We're just one block away from the New York Stock Exchange, so if you happen to be in Manhattan, please come check it out.