The American economy, like most world economies today, is run on a system of fiat money, or money that is assigned its value by government decree. Since this money has no intrinsic value of its own, its value and supply must be carefully managed and regulated, not just within the nation’s borders but also in accordance with the economies of all other nations. In light of this need for careful stewardship of the economy, the United States maintains a central bank, called the Federal Reserve (or, more commonly, the Fed).

The Fed as it exists today is actually the United States’ fourth attempt at founding a central bank. In the midst of the Revolutionary War, America’s Continental Congress ratified the Articles of Confederation, which, among other edicts, gave Congress the power to issue bills of credit. A private national bank, modeled after the Bank of England, was established shortly thereafter, but was denied the opportunity to become a central national bank due to unease about foreign influence and other political concerns. The official First Bank of the United States was created in 1791, and lasted 20 years before being denied a renewal of charter by President James Madison. The Second Bank of the United States opened in 1816, and it too only lasted 20 years before President Andrew Jackson shut it down. Political opposition to the very idea of a central bank had been a chief culprit of these failures, and it would be almost a century before the United States would try again.

In 1907, a profound financial panic occurred, a direct result of a failed attempt by stock traders to corner the market on shares of the United Copper Company. The failure created a series of bank runs on those institutions that had backed the bid. As is often the case with bank runs, the atmosphere of worry spread nationwide, causing other banks to suffer runs and even leading to the collapse of, at the time, the third-largest financial trust in New York City, the Knickerbocker Trust Company. With no central bank in existence to attempt stabilization of the economy with an infusion of currency, the only reason that the crisis did not fling the country into irreparable economic turmoil was the work of private business tycoons such as J.P. Morgan, who banded together and contributed much of their own capital to bolster the banks. It was this barely dodged catastrophe that led to a series of financial reforms over the next few years, culminating in 1913 when Congress and President Woodrow Wilson passed the Federal Reserve Act.

In structure, the Federal Reserve is unique among the world’s central banks. Although it is designed to function as an entity “independent” of the federal government, thereby limiting its exposure to political influence, the Fed also employs a mixture of private and public sections in its operation—most similar banks in the world operate under either entirely private or entirely public ownership. It is also the only such bank to not make its own currency (which is instead printed by the United States Treasury). The Fed is managed by a Board of Governors, all of whom are presidential appointees, and is also comprised of the Federal Open Market Committee (FOMC) and representatives from twelve other Federal Reserve Banks located throughout the country.

The Fed has been reformed a number of times since 1913, especially so after the recovery from the Great Depression. Currently, its chief mandate is to provide the means to deal with bank panics, but it also sets interest rates, operates as a lender of last resort in case the banking system is in need of capital, and generally regulates the entire money supply by balancing the factors of employment rates and inflation. The importance of these functions to the American economy cannot be overstated. Any competent financial player in any market knows that a key component of success or ruin is an ability to observe, analyze, and possibly predict the actions of The Fed…and any competent Board of Governors is aware that The Fed is being closely watched.

A key component of America’s westward expansion in the 19th century was the government’s distribution of public land to “free farmers,” ordinary citizens who had a desire to establish themselves and their families through agriculture. The Homestead Act of 1862, signed into law by President Abraham Lincoln, introduced a system by which these citizens could claim for themselves a piece of the public lands—up to 160 acres—that were controlled by the federal government. The Homestead Act gave farmers a three-step process that allowed them to obtain the land without having to purchase it directly.

1) File an application for a specific homestead.
2) Improve the land through farming or other, provable means.
3) File for deed of title.

The Act itself was the culmination of over a decade of legislative debate, which included several failed attempts to pass a bill through Congress. Opposition to any such legislation had largely been led by representatives from the plantation states of the South, who feared the competition such free farms would create. With the secession of the Confederacy in 1860, the remaining members of Congress were able to pass the legislation virtually unopposed.

Despite the attempt to ease the process, less than half of the homestead applicants managed to achieve the requirements needed to claim title to their land. Additionally, a system of proper checks and regulations were missing from the original bill, allowing for unscrupulous entrepreneurs to abuse the homestead process—occasionally by carving out a homestead that contained a vital resource, such as water, and then refusing to let neighboring homesteads partake of that resource.

The Homestead Act was revised and added to a number of times over the course of the next century, including the passage of the Enlarged Homestead Act in 1909 and the Stock-Raising Homestead Act in 1916. Homesteading as a federal practice ended in 1976 in all parts of the United States except for Alaska, which was permitted to continue granting homesteads for another decade. The final homestead granted in the United States of America was an 80-acre plot in southwestern Alaska, officially deeded in May of 1988. Since then, the federal government has deemed that the “needs of the American people” are best served with the remainder of public lands kept under federal control.