Perhaps nothing is so vilified as “capitalism” in the modern world. According to a study by North Dakota State University, only a quarter of college students have a positive view of capitalism.

Since the response to Covid-19, the preeminent economic concern of the American public has been, simply put, price inflation. In an attempt to curry favor with the electorate, Vice President Kamala Harris recently declared support for price controls to combat high prices, which she attributes to supply chain issues and corporate greed.

The Federal Reserve’s FOMC slashed the target federal funds rate at its meeting this month, reducing the target rate by 50 basis points from 5.5 percent to 5.0 percent. This was the largest cut to the target rate since March of 2020 in the midst of the Covid Panic. 

In the last few months, the Federal Reserve has signaled that it is prepared to cut interest rates. Today’s 50bps rate cut, however, exceeded most expectations.

As ZeroHedge has noted, “only 9 of 113 economists surveyed” expected this sort of move, and the Fed’s own dot plot shows a growing appetite for more aggressive action in the near future.

The monetary and banking system plays an incredibly important role in contemporary economies. Knowledge of how this system functions should therefore be spread as widely as possible, yet the education system barely instructs its students about this subject, if indeed it instructs them about it at all. This article aims to contribute to bridging this gap by giving a basic overview of how the system of money creation and banking works today.