Zaid

The first part of the book is about the failure of the Fed.

So go check out that interview if you missed it.

It was a great conversation.

Now, this massive failure by the bank led to Congress passing new laws regarding the Fed, including shifting powers away from the regional reserve banks and centralizing it in Washington with a board of governors.

Now, the Fed did learn from their mistake, and their next big test came during World War II.

During the 1940s, the Fed kept interest rates artificially low to help the U.S.

government finance the war efforts to build tanks and planes.

Now, after the war ended, the US Treasury wanted to keep interest rates low to reduce the US government's borrowing costs.

But the Fed actually pushed back.

They argued that keeping rates too low for too long would cause inflation to spiral out of control.

And this led to a major turning point in 1951 called the Accord.

freed the Fed to use monetary policy independently without being forced to support the U.S.

Treasury.

See, before this, the Fed was basically taking orders from the Treasury Department, but the accord finally separated them, establishing the Fed's independence.

That allowed the Fed to set interest rates based on economic data and not what the Treasury Department wanted or what the president wanted.

And it's this accord that is considered the birth of the modern Fed independence.

Now, the next major shakeup for the Fed came in the 1970s.

This was a time of great inflation, and the Fed's independence was tested.

See, during the 1970s, the Fed kept interest rates low to boost employment.

But keeping interest rates too low can cause inflation, and that's exactly what happened.