This chapter focuses on the emergence of the Federal Reserve System as an institution and compares its emergence to the creation of the federal republic as two major instances when the ideas and interests of a specific group were imbedded into institutions in the United States. The two historical accounts demonstrate how ideas, groups, and institutions have made an impact on one of the most powerful nation-states in the international system. This chapter demonstrates how the neorealist model fails to recognize the importance of institutions in creating policy, and identifies and analyzes different types of power and how that power is used in the agenda-setting and policymaking process.
It is important to step back and look at the larger picture from time to time so as to recapture the intent of this analysis. As Chapters 3, 4, and 5 delve into the banking history and policies of the United States, it is easy to lose sight of the fact that this study is about the international system, not just U.S. banking and how it affects the U.S. trade deficit. In Chapter 2 it was stated that central banking policy directly affects whether or not a country has a trade deficit, and so it was important to understand why a central bank would or would not pursue a policy agenda that tried to achieve a trade balance. In a straight international economic or U.S. historical case study of the Federal Reserve System and its policies, it would