The Federal Reserve does not “control” the economy or financial markets, regardless of what Wall Street propaganda says. It does, however, have a long history of screwing things up. From George F. Smith at lewrockwell.com:
An inhabitant of Berlin, who in 1914 would have been jubilant upon receiving an unexpected legacy of 1,000 marks, did not think an amount of 1,000,000,000 marks worth his attention in the fall of 1923. — Ludwig von Mises, Interventionism, An Economic Analysis
World War I could be said to have produced the incredible destruction of the mark, but guns didn’t fire upon the German currency. Like the currencies of other belligerents the mark was switched from a gold to a fiat currency to provide the needed liquidity to pay for the war, “liquidity” here meaning paper devoid of any connection to civilization’s money, gold.
The US had been without a central bank until December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. It too facilitated funding when Congress voted to declare war on Germany in April, 1917. Using conscription, the US sent millions of American men overseas to join the slaughter, killing an estimated 115,000 of them.
The Fed helped keep the war going until the punitive Treaty of Versailles, after which Germans found Hitler appealing, and it created the bubble in the 1920s leading to the Crash and the Great Depression. With FDR in charge, gold was lost to a fiat currency managed by the Fed, spawning an age of inflation. According to the Richmond Fed, “By 1947, the Fed was summarizing its ‘primary duty’ as ‘the financing of military requirements and of production for war purposes.’”
If war could be considered a market intervention it would be the absolute worst intervention of all time. But wars are lucrative rackets to some and don’t go far without funding. Taxes alone can’t cover the costs of a long conflict without igniting a revolt. This is why governments need a central bank that can produce unbacked certificates quickly that governments declare to be money.
