In this chapter, Charles Wheelan discusses the importance of the Federal Reserve and how the people that are in charge of this system have the ability to significantly control the economy. When they see fast inflation happening, they raise the interest rates to offset and halt this inflation. When inflation is happening at a very low pace (it is supposed to be rising at around 3 percent each year), the Fed lowers the interest rates so more people invest, borrow, and purchase. This roller-coaster of rates is an ongoing, stressful, and very demanding job when it comes down to the attention economists have to pay to the prices of everyday items. Wheelan also discusses money and a monetary unit. It makes me feel a bit uncomfortable that money really has no value. The only value that is behind it is our faith that someone else wants it. So, what if everyone decides to stop wanting it and start using it as wallpaper? The fact that this is at all a possibility (however far fetched it may be) makes me uneasy with money in general.
Overall, the problem of inflation with the value of the dollar decreasing is something that will be relevant and directly impact me throughout my entire life. It happens every year and slowly every day. With the dollar decreasing in value, how can I be confident that it will be of any value in my wallet than a penny in thirty years? I may be lying awake at night pondering this. Thankfully however, it is now beneficial to understand how the Fed influences and regulates the economy mainly through interest rates based on economic observations.
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