[This is part of the series: The Complete Guide To Economics 101.]

What is a bank?

A Bank is an entity that accepts monetary deposits from the public.

In this, the bank issues the customer an account where deposited funds can be withdrawn on demand at a later date.

Banks also lend money to customers based on creditworthiness and regulated short-term interest rates.

I thought it was interesting that the word “bank” comes from the Italian word “banco.”

Banco translates as “table” or “bench” – the very surface where the banking business took root in the 14th century.

[This is part of the series: The Complete Guide To Economics 101.]

What is The Federal Reserve?

The Federal Reserve refers to the central bank of the United States.

As with all central banks, “the fed” controls the monetary system of the USA.

The monetary system is primarily controlled by:

1. Controlling the money supply.
2. Setting short-term interest rates.

In addition to regulating banks, and setting reserve requirements, The Federal Reserve is also a lender of “last resort” to banks that are in financial trouble.

This is no free market for money.