The Federal Reserve System of the USA and Central Banks of the Other G-7 Countries

In today’s world, economics is what makes the world go round. The world’s economies have become the authorities in the world, deciding what countries with lesser economies can do and when they can do them. A good example of this can be found in Iran’s case. Iran had begun developing a nuclear arsenal in its attempt to become a world power.

However, the United States saw this as a risk to their national security, as Iran is a country that has a troubled history with the United States, not to mention the fact that Iran’s geographical position means that it can potentially threaten countries in the Arab Gulf with whom they have also had poor relations in the past. Hence, America used its status as an economic powerhouse to leverage economic sanctions upon Iran which caused the country to eventually abandon its nuclear program.

There are a total of seven nations and one economic union that together form the most powerful economies in the world. These nations include America, Canada, the United Kingdom, France, Germany, Italy and Japan along with the European Union. These nations and the EU come together to form what is called G7, and together possess around sixty three percent of the worlds total wealth if the EU is not included and over seventy percent if the EU is included.

America is unique among the other members of G7 in that it is the only country not to possess a central bank. Instead, it possesses what it calls a Federal Reserve, which essentially is where the entire reserve currency of America is held. The other six member nations and the European Union all have central banks. The banks for Canada, France, Germany, Italy, Japan and England are, respectively, the Bank of Canada, Banque du France, Banca d’Italia, Nippon Ginko and the Bank of England, with the European Central Bank located in Frankfurt serving as the central bank for the European Union.

The governance of all of the banks apart from the Federal Reserve are similar. All of the banks have a single governor, and often possess a council of people in positions with less power or executive authority than the actual governor of the central bank that is responsible for most of the executive decision making. However, in the case of the Federal Reserve of America, the central banking system of the US is run by a board of governors instead of a single governors, all of whom are appointed by the President and are confirmed by the Senate to serve fourteen year terms. There is a chairperson of the board of governors whose job is to adjudicate and holds the final executive decision making power.

These central banking systems exist to issue bank notes, as these central banks are the sole authority that can do so, and maintain interest rates, all in all in an attempt to maintain a sound financial climate.