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Central banks perform a number of functions; basically they act as the government's own bank, holding the government checking accounts and collecting tax receipts, facilitating the issuance of bonds, etc. They are also frequently given regulatory functions, such as the enforcement of fractional reserves...
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[quote user="donmc"] Also, the main reason that the fed lowers rates is to increase borrowing and thus increase spending/consumption (to "stimulate the economy" in news fedspeak). [/quote] Note that this is a smokescreen put up by John Maynard Keynes in 1935, well after the Fed was...