There is a common question of investors, why the central bank of US is called Federal Reserve and not central bank? In Europe, they have the European Central Bank, in Australia and New Zealand, they have the Reserve Bank of Australia and Reserve Bank of New Zealand, while the other major central banks are called Bank of England (mother of all central banks), Bank of Japan (one of the big four central banks), Bank of Canada (one who issued the highest bank note of 1,000 Canadian Dollar).
The first central bank of US is called Bank of North America in 1781 in Philadelphia. In 1791, it is replaced by First Bank of United States, and in 1816 again replaced by Second Bank of United States. The turning point comes at 1907. It was the first global financial crisis. The stock price in New York Stock Exchange fell 50% in October, people compare it with the financial tsunami in 2008.
There was no reserve system at that time, and JP Morgan used their own money as reserve and persuade other banks to follow them. President Roosevelt established the Reserve System in 1913 to avoid the crisis of 1907 to come again.
Thus Federal Reserve System was established.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.