Aside from my explanation of why it is fraudulent above, it is the major cause of the boom/bust cycle we experience.
If you look back to the banking panics of the 1800s, most were created by the local banks practice of frb. By artificially increasing the money supply, it generates inflation and sends a message of a more powerful economy than really exists. This leads to mal-investment (the over-capacity that we see today) and inevitably ends in deflation. It is no co-incidence that the 30s depression was preceded by "The Roaring Twenties" and our current situation was similarly strong during the 90s.
You know, there was a time the Forrest Service squelched every little fire. So what happened? The fuel....THE RISK...piled up. Eventually a little fire couldn’t be contained, and all that fuel that would of been burnt in many smaller fires was available to burn and you get a great big fire.
Small panics, repeated every generation, clear out the risk. Educated each generation, and are quickly recoverable.
We haven’t had one for a long time.
It will come, and it will make two years ago look like a hickup.
We will need a dictatorship to hold the bloated, corrupt, hack infested paper shufflers, and the mass of fat, lazy, public edjamakted ignorant,deluded masses at bay.