At the federal reserve bank in San Francisco, CA do they give you gold or something when you give them cash?


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I'm visitng and I wondered if I gave them like $20 to, I don't know cash it in? Is that what you do at a federal reserve bank? What do they give you when you give them money? Or?? Am I just not understanding what the federal reserve bank is. Please, educate me. Thanks.


Banks in San Francisco, CA



Answer (1):

 
F. Frederick Skitty

No, US banknotes are not redeemable in gold and haven't been since 1934.
The Federal Reserve Bank does not deal with the public. Each Federal Reserve bank is best understood as a bankers' bank. Member banks use their reserve accounts with the reserve banks in much the same way that a bank depositor uses his checking account. They may deposit in the reserve accounts the checks on other banks and surplus currency received from their customers, and they may draw on the reserve for various purposes, especially to obtain currency and to pay checks drawn upon them (see clearing).

More importantly, the required reserves also enable the Federal Reserve authorities to influence the lending activities of banks. So long as a bank has reserves in excess of requirements, it can enlarge its extensions of credit; otherwise it cannot increase its extensions of credit and may be impelled to borrow additional funds. Inasmuch as the Federal Reserve authorities have power to increase or decrease the supply of excess funds, they are able to exercise considerable influence over the amount of credit that banks may extend. By controlling the credit market, the Federal Reserve System exerts a powerful influence on the nation's economic life. Federal Reserve activities designed to expand bank credit may lead to an upswing in the business cycle, which tends to lead toward inflation; conversely, a restriction of credit generally results in decreased business growth and deflation.