Commentary
Recent turmoil in the banking sector has focused attention on the role of central banks, both in economies and in bank supervision and control.  This will discuss central banks, like the U.S. Federal Reserve, and some of the tools they use to implement their policies, which can be opaque to the average person.
First, let’s differentiate fiscal policy, which, in the United States, is controlled by the Congress and the president through the federal budget, and monetary policy, which is the province of the Federal Reserve.
Fiscal policy relates to spending, deficits, government revenues, and taxation. It is a reflection of elected officials’ desires and objectives for the economy and should reflect the well-being of the people. You’re able to deduct the interest on a home mortgage from your income taxes, for example, because elected officials believe home ownership is a desirous outcome for the economy. The reasoning goes that home ownership helps builds stable communities amd stimulates investment in consumer durables, like furntiture, refrigerators, and dishwashers….