Decoding the Federal Reserve: How Does the Central Bank's Game of Power Work? [Introduction to Hu Jie's Master Class]

This issue's content

The importance of the Federal Reserve is self-evident; financial institutions and markets worldwide are paying close attention to it.

Although theoretically it is merely a country's central bank—almost every major economy has its own, and their operating principles are currently quite similar—in reality, it is the world's most important central bank. Its every move impacts not only the US economic and financial markets but also the economies and financial markets of countries around the world.

So in this course, we will share the working principles of the Federal Reserve to help you understand what central banks do, including how central banks in other countries work; and to provide you with practical help—paying attention to it will be very important in your future investments and economic activities.

There's another, somewhat secondary, purpose: There are many rumors circulating about the Federal Reserve, most of which are unreliable. This course will systematically introduce the working principles of the Federal Reserve. With this foundation, you'll be able to clearly discern whether these rumors are accurate or not, or which aspect of the Federal Reserve's work they represent. Otherwise, it's easy to misunderstand a series of actions by the Federal Reserve.

"The Transformation of the Federal Reserve: Decoding the Central Bank's Game of Thrones"—this title borrows from "Game of Thrones," creating a compelling narrative. Simply put, it explains how the Federal Reserve works as a modern central bank. This masterclass is divided into two parts:

The first part introduces the entire financial system, and of course, it also explains the central bank's position within it. The central bank is, in fact, a part of the financial system, and a very important one at that—a complete understanding of the financial system itself lays a solid logical foundation for understanding the work of the central bank.

Here's a side note. What exactly is the financial system like? The truth is, many finance graduates, even after graduation and many years of work, don't have a complete understanding, which is regrettable. Finance seems to be a field everyone encounters daily; banks, funds, insurance—everyone can name a few.

But if I ask: What is finance? What is the financial system? Few people can answer in a very concise way. A person who truly understands a concept can explain its essence in a very simple way—the requirement is that you can explain finance and the financial system clearly to your grandmother at the dinner table.

Therefore, in the first part, we will begin with finance and the financial system, with a particular emphasis on central banks. Building on this foundation, the second part will discuss the Federal Reserve, especially its potential direction following its recent change of leadership. Through observation and analysis of this event, we will gain a more direct understanding of the details of central bank operations.

The main objective of the first part is to introduce the financial system, especially the central bank, which is divided into four sections: First, the basic concepts of finance and the general blueprint of the financial system; second, to discuss the core function of the central bank—creating money—in a separate section; third, to dissect the details of the central bank's work; and fourth, to tell three recent stories directly related to the Federal Reserve, through which we will further elaborate on the details of the central bank's work.

—The above is the course introduction. In the full course that follows, Professor Hu Jie of the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University and former senior economist at the Federal Reserve will begin with the most basic question, "What exactly is finance?", dissecting the dual "money-making techniques" of central banks and commercial banks. He will then reconstruct the interest rate decision-making process from the perspective of a former Federal Reserve insider, finally addressing the most pressing issue: Will the Federal Reserve's working paradigm shift again after the new chairman, Warsh, takes office, and will this cause the 17-year bull market in US stocks to lose its support?

Risk Warning: Masterclass is a platform that selects qualified third-party professionals to teach investment research theory courses. The content taught does not constitute investment advice for any specific product. The opinions expressed in the platform's courses are for learning and reference only and do not represent the opinions or views of Wall Street Insights, nor do they address the specific investment objectives, financial situation, or needs of users. Markets are volatile and uncertain, and the platform is not liable for any losses incurred as a result of your reliance on the course opinions or information. Investment involves risk; please make your decisions carefully.