Zaid

And number two is maximum employment, keeping unemployment low and the job market strong.

Now, the main way the Fed does this is by controlling interest rates.

By raising or lowering rates, the Fed can essentially speed up or slow down the entire economy.

Lowering rates makes borrowing money cheaper, which encourages spending and investment, while higher rates do the opposite.

They make borrowing more expensive, which slows things down.

It's an incredibly powerful tool, and the Fed's decisions have a massive impact on the economy, and sometimes they get their decisions wrong.

So let's go through some of the big moments for the Fed over the last 100 plus years.

The Federal Reserve likes to operate in the background, but during the biggest moments in American history, like wars, depressions, and pandemics, the Fed becomes the main character, and their track record is mixed.

Let's first start with the biggest L in the Fed's history, the Great Depression.

See, back in the 1920s, when the Fed was first formed, they seemed to have things figured out.

They were adjusting interest rates, buying and selling government securities, and the economy was humming along.

You might remember hearing about the roaring 20s from history class.

Well, that all came crashing down in 1929.

The stock market crashed and so did the economy.

GDP fell by 30%, unemployment hit 25%, and the economy entered the Great Depression.

Many economists and historians today blame the Fed for not stepping up and being more aggressive.

Instead of flooding the system with cash to keep banks alive, they let banks fail by the thousands, which destroyed confidence in the entire financial system.

And it's that lack of action by the Fed that probably made the Great Depression worse than it had to be.

I actually talked to financial journalist Andrew Ross Sorkin about the Fed's role in 1929 in my recent interview with him.

Andrew wrote a very detailed and great book about the crash in 1929.