It's a good thing your parents don't know where he lives. For that matter, it's a good thing most people don't know either. Alan Greenspan, the Chairman of the Federal Reserve of the United States of America, is a very powerful guy. He's even been called the "most powerful man on the planet." I asked myself why, Mr. Greenspan looks pretty normal to me. Well, here's what I found out.

The Federal Reserve (or Fed, for short) is the bank where all banks do their banking. What? Okay, it's our nation's largest bank, and it only lends money to banks, not to regular people. It decides how much interest to charge banks when they borrow money from it. Mr. Greenspan is the head of the Fed. He's the guy who decides how much to charge.

Why does that matter, you ask? Okay, here's why: when the Fed raises interest rates (that's what its called when they charge banks more for borrowing money), the banks don't just sit there and cry, they pass that increase on to their customers. So when Mr. Greenspan decides that banks should pay more, he's really deciding that we all should pay more, for everything: homes, cars, schooling, etc.

Your parents are probably worried that interest rates are going to go up. They never go up a lot, but even a little goes a long way. If your house is worth $100,000, if interest rates went up a half a percent (from 6% to 6.5%), the amount that your parents would have to pay each month for the loan would go up by about 60 or 70 dollars. That's a lot when you're trying to stick to a budget.

Before you go out and what to tell Mr. Greenspan where to shove it, listen to this. The Fed is the government agency responsible for keeping the economy running smoothly. You've heard all about the Great Depression, right? Well, the Fed is there to make sure something like that never happens again, and Mr. Greenspan is the guy who keeps watch over the economy.

Our biggest enemy in all of this is inflation. Mr. Greenspan makes sure that inflation is kept as low as possible, that way our money lasts as long as possible. So when he sees that inflation is coming around the corner, one of the things he does is raise interest rates. Raising interest rates can keep inflation in check, and keeps our economy healthy. So, while higher rates may keep your parents mad, it's better for the whole country to have rates be high for a little while. They always come down, too.

Did You Know?

Mr. Greenspan was the son of a stockbroker. Before making a name for himself in economics, his first real job was as a saxophone player in a swing band!