system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Arguments for and against The Federal Reserve. 

I know there are some politicians who want to dismantle it while others see it being vital for the nation. I want to better understand both sides of the argument.
gpt
I'll take the "pro-federal reserve" side of the question, I'll let somebody else handle the anti-federal-reserve side.

So let's say there's three guys on an island, Fred the Farmer, Tom the Tailor, and Chad the Carpenter.

But today, they have a problem.  Fred needs clothes from Tom.  Tom needs his roof fixed by Chad.  Chad needs some food from Fred.

Unfortunately, when Fred bumps into Tom, they fail to make a deal, because Tom needs Chad's help, not Fred's help.  That's the problem with "barter," which is direct trading.  If you bump into somebody, and they have exactly what you need, unless you also have exactly what they need, you can't make a deal!  The likelihood that two people will bump into each other, and they both have exactly what the other person needs, is pretty slim.

These three guys, together, have everything they need.  But they can't organize a trade.

So that's why money exists: to help people trade.  Let's say they get together and make three "dollars" using three slips of paper and a green pen.  They each get a dollar, and they each agree that they'll accept a dollar for whatever it is they do.

Now here's what happens: Fred bumps into Tom, and buys clothes for a dollar.  Then, Tom bumps into Chad and buys a roof repair for a dollar.  Then, Chad bumps into Fred, and buys food for a dollar.  Now everyone has what they need.  Interestingly, everyone still has a dollar.

Now for a while, life is good.  The three of them buy thousands of dollars worth of stuff from each other, using their three bills.  This is possible because when you use dollars, they're not used up - they just circulate.  Each bill can be used over and over.

But one day, a new person, Mary, lands on the island.  She has a ship full of video games, food and clothes.  And she lives on her ship!  So she doesn't need anything from these three guys at all.  But she's nice, so she offers a video game each to Tom, Chad, and Fred.  She accepts a dollar from each of them, even though she doesn't really need Fred's food, Tom's clothes, or Chad's repairs.  She figures she'll hold onto the dollars, because maybe she'll want sexual favors later.

Now Mary has three dollars, and the other guys have nothing.

Then, all of a sudden, Fred needs clothes from Tom again.  Tom needs his roof fixed by Chad again.  Chad needs some food from Fred again.  But Mary has all the dollars!

So they go to Mary, and they try to get some dollars from her.  But Mary has everything she needs.  She still has a ship full of video games, her home is in great shape, her clothes are nice, and her fridge is full of food.  She thanks the guys for the kind offer, but she decides to keep the three dollars in case she needs them later.  She's not being mean, she's just being sensible.  But Fred, Tom, and Chad are in a bind.

Fred, Tom, and Chad want to trade with each other.  They have plenty of stuff: Fred still has food, Tom still has clothes, and Chad still can fix houses.  But they have no dollars.  They vaguely remember that it's possible to trade without dollars, and they consider going back to the barter system.

But that's a bad idea.  If they're smart, they'll get out their paper and green pen again.  It would be silly for them to go back to barter, when they have a better way.  When this whole thing started, they just made the dollars.  They can do it again, and they'd be foolish not to.

Mary will be angry, because she gave up three video games for her three dollars, and the three guys will just be making dollars "for free" using paper and pen.  She has a point.  She correctly thinks that her three dollars might be seen as less valuable, if they aren't the only dollars around.

But it's also not reasonable for Mary to expect Fred, Tom, and Chad to go back to the barter system.  They need to compromise.

The Federal Reserve's job is to balance those two needs against each other.  Chad, Fred, and Tom need to have enough dollars to be able to trade without bartering, but then again, the reserve shouldn't make so many dollars that Mary's money becomes worthless.

Now, some people think there shouldn't be a federal reserve.  In that case, Mary would have the dollars, and that would be that. Fred, Chad, and Tom would have to go back to bartering with each other.