Podcast Summary: Down to Business English
Episode 123 – The Federal Reserve Banking System
Hosts: Skip Montreux & Des Morgan
Release Date: December 4, 2017
Overview
This episode of Down to Business English dives into the United States Federal Reserve System, summarizing its functions, history, and leadership. The hosts, Skip Montreux and Des Morgan, focus on making the intricacies of the Fed accessible to listeners improving their business English, using clear explanations, humor, and context.
Key Discussion Points & Insights
1. Recent Events Prompting the Topic ([01:08–03:19])
- The conversation begins with a lighthearted exchange about President Donald Trump’s visit to Japan and then shifts to a “hugely important” but underreported event: Trump’s recent nomination of a new Federal Reserve chair.
Memorable Quote:
“President Donald J. Trump was here playing golf with Prime Minister Shinzo Abe, and then afterwards, they sat down together for a nice steak dinner.” — Skip Montreux [01:45]
2. What Does the Federal Reserve Do? ([03:40–04:03])
- Two Key Roles:
- Sets US interest rates
- Controls money supply
Des Morgan explains:
“Basically, the Federal Reserve does two things. Firstly, it sets the interest rates for the US and secondly, it controls the supply of money.” — Des Morgan [03:52]
3. How Interest Rates Work ([04:05–05:16])
- The Fed attempts to control inflation by adjusting interest rates. If borrowing is too easy (low rates), demand and prices rise.
- Example: Housing market inflation when loan rates are low.
Contextual Dialogue:
“If more people want to purchase the same house, the price will naturally rise as each buyer is willing to pay more for it.” — Skip Montreux [04:47]
- Raising rates can slow the economy, so it's a decision with consequences.
4. Controlling the Money Supply ([06:01–06:54])
- The Fed manipulates the amount of money in the system through the buying/selling of bonds:
- Buying bonds: Increases bank reserves, money supply goes up.
- Selling bonds: Decreases money supply.
“The Fed buys back their own bonds from the large banks, the result being that the banks have a greater amount of money to lend out.” — Des Morgan [06:34]
5. The Evolution of US Central Banking ([07:02–11:06])
- First two US central banks: Each had 20-year charters—disbanded due to public distrust (seen as favoring big business).
- Free Banking Era (1837–1862): Banks chartered by states, many could issue their own currency (over 700 by 1862).
- Civil War Era: National banks backing currency with federal bonds, but instability remained.
- Creation of the Federal Reserve (1913):
- 12 regional Federal Reserve Banks established, overseen by a single federal body, intended to balance regional interests. In practice, the New York Fed dominated.
Notable Quote:
“The idea was that the Federal Reserve banking system would not be too heavily influenced by the northern states and that all regions would have somewhat of an equal say in the monetary policy.” — Des Morgan [11:10]
6. The New Fed Chair: Jerome Powell ([12:03–13:34])
- Background: Powell had been a Fed Governor since 2012, former Undersecretary of the Treasury for President George H.W. Bush.
- Policy Stance: Expected to maintain continuity if the economy remains strong, but may differ in response to crisis — less supportive of unconventional measures like quantitative easing used after the 2008–09 financial crisis.
Insightful Quote:
“Powell...has been a strong supporter of Yellen as she has unwound the assets the Fed acquired in the crisis of 2008-2009. At the same time, he has since been critical of the unconventional measures taken by the then chairman, Ben Bernanke.” — Des Morgan [12:42]
Notable Quotes & Moments
- “Managing the supply and value of money is a tricky business.” — Des Morgan [07:02]
- “Both [first and second US banks] were 20% owned by the government and 80% owned by big business. And the feeling among the people was that the banks were favoring its majority owners. Big business over the man in the street.” — Des Morgan [08:15]
- “No apology necessary. It would take more than the occasional flippant behavior from you to create any animosity from my side. I knew you were just teasing.” — Des Morgan [19:42]
Important Timestamps
- [03:52] — What the Fed actually does (roles summarized)
- [04:37] — Example of inflation with housing market
- [06:34] — How the Fed manipulates money supply with bonds
- [07:16–10:59] — Brief history of US central banking
- [12:03–13:43] — Profile and expectations for new chairman Jerome Powell
Business English Vocabulary Segment ([14:32–18:30])
The hosts break down five key terms from the episode:
- Flippant: Not serious enough for a serious topic
- Animosity: Bad feeling or ill will; example from Apple & Microsoft rivalry
- Disbanded: To break up an organization (historically, the first and second US banks)
- Man in the street: Refers to the average person or public
- De facto: In fact or reality, without legal recognition (e.g., “de facto support”)
Episode Tone & Style
- The conversation is friendly, accessible, and occasionally humorous, making complex economic concepts easy to grasp.
- The co-hosts often joke with one another, using business concepts as relatable, teachable moments.
Summary
This episode offers a practical and comprehensible overview of the US Federal Reserve—its function, history, and importance under new leadership—while also serving as a valuable resource for business English learners.
For any listener looking for a clear, conversational breakdown of American central banking and enhancing business-focused vocabulary, this episode delivers well-structured, engaging content.
