Somewhere, it all went wrong.
"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered." -- Thomas Jefferson
The Federal Reserve
The Fed's power developed slowly in part due to an understanding at its creation that it was to function primarily as a reserve, a money-creator of last resort to prevent the downward spiral of withdrawal/withholding of funds which characterizes a monetary panic. At the outbreak of World War I, the Fed was better positioned than the Treasury to issue war bonds, and so became the primary retailer for war bonds under the direction of the Treasury. After the war, the Fed, led by Paul Warburg and New York Governor Bank President Benjamin Strong, convinced Congress to modify its powers, giving it the ability to both create money, as the 1913 Act intended, and destroy money, as a central bank could.
During the 1920s, the Fed experimented with a number of approaches, alternatively creating and then destroying money which, in the eyes of many scholars (notably Milton Friedman), helped create the late-1920s stock market bubble.[1] In 1928, Strong died, leaving a tremendous vacuum in Fed governance, from which the bank did not recover in time to react to the 1929 collapse, unlike after 1987's Black Monday. Because of this power vacuum, the Fed adopted what most would consider a restrictive policy by today's standards, exacerbating the crash.
After Franklin D. Roosevelt took office in 1933, the Fed was subordinated to the Executive Branch, where it remained until 1951, when the Fed and the Treasury department signed an accord granting the Fed full independence over monetary matters while leaving fiscal matters to the Treasury.
The Fed's monetary powers did not dramatically change for the rest of the 20th century, but in the 1970s it was specifically charged by Congress to effectively promote "the goals of maximum employment, stable prices, and moderate long-term interest rates" as well as given regulatory responsibility over many consumer credit protection laws.
1781–1836
Bank of North America
Some Founding Fathers were strongly opposed to the formation of a central banking system; the fact that England tried to place the colonies under the monetary control of the Bank of England was seen by many as the 'last straw' of English oppression and that it led directly to the American Revolutionary War. Other Founding Fathers were strongly in favor of a central bank. Robert Morris, as Superintendent of Finance, helped to open the Bank of North America in 1782, and has been accordingly called by Thomas Goddard "the father of the system of credit and paper circulation in the United States." As ratification in early 1781 of the Articles of Confederation & Perpetual Union had extended to Congress the sovereign power to emit bills of credit, it passed later that year an ordinance to incorporate a privately subscribed national bank following in the footsteps of the Bank of England. However, it was thwarted in fulfilling its intended role as a nationwide central bank due to objections of "alarming foreign influence and fictitious credit," favoritism to foreigners and unfair competition against less corrupt state banks issuing their own notes, such that Pennsylvania's legislature repealed its charter to operate within the Commonwealth in 1785.
Now, if we have anyone to blame for your current economic situation, where should we be pointing the blame?
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