Myths People Still Believe About The American Financial System
How Misinformation Skews Our View Of The US Economy
Did you know that many beliefs about the American financial system are flat-out skewed? Some myths feel like undeniable truths, but what if they lead you to poor financial decisions? Here’s the truth.
The Federal Reserve Prints All US Money
Contrary to popular belief, the Federal Reserve doesn’t print physical money. This responsibility lies with the US Treasury’s Bureau of Engraving and Printing. The Federal Reserve’s primary role is managing the economy through monetary policies, such as setting interest rates and conducting open market operations.
The Federal Reserve Prints All US Money (Cont.)
Then, why do we hear about the Fed creating money? This refers to purchasing government securities or adjusting reserve requirements for banks. These practices increase the electronic money supply but not the amount of cash circulating in your wallet.
The Stock Market Reflects The Economy
The stock market is often used as a shorthand for economic health, but it is not a comprehensive indicator. It shows the performance of publicly traded companies, which represent only a fraction of the overall economy. GDP growth, unemployment rates, consumer spending, and small business performance are also relevant.
The Stock Market Reflects The Economy (Cont.)
Stock prices are influenced by investor sentiment and global events, which may not align with actual economic conditions. For example, during the COVID-19 pandemic, the stock market rebounded quickly due to stimulus measures and low interest rates, even as unemployment soared and small businesses struggled.
