Tonight while doing some reading, I came up with an analogy for the role of the federal reserve. It's by no means a perfect analogy, but hopefully it's a lot more accessible to people, most of whom probably don't really understand the role of the federal reserve and what it does. Well, first off, the fed has a number of functions, and this analogy only describes one aspect of it's functions, but hey, it's a start, right? 
So in this analogy, banks are like bakers, and money is like cookies. So yes, it's true that money can simply be "made" any time the banks decide to bake more cookies. The trick though is that only the federal reserve is allowed to make cookie dough, so any time a bank wants to bake more cookies, it needs to go to the federal reserve to get more dough. So this seems to give the fed pretty good control over how many cookies are out in the economy, because if there are too many cookies, it just gives out less cookie dough and eventually the number of cookies in the economy will be reduced as cookies are eaten (ok, the analogy breaks down here, but I'm still going with it). But the reverse is not necessarily possible. Let's say everyone has gotten sick of cookies, and doesn't want any more cookies, everyone has rotten teeth and stomach aches from eating too many cookies, and no one wants any more cookies. Well, now what can the fed do? I can make tons of cookie dough, but unless the bakers bake it, it's only dough - it's not actual cookies. And what incentive does the bank have to bake these cookies? No one wants cookies, so it has no reason to take the cookie dough from the fed and bake it into cookies. In fact, if no one wants cookies, the banks are probably trimming staff and reducing their cookie-making capacity.
You could ask - well, why doesn't the fed just bake cookies directly? Well, theoretically it could - right now that's just not how it works, and it'd probably be a huge change in the way the financial system works if it could bake cookies directly. But that actually doesn't solve the real problem. Even if the fed bakes cookies directly, and no one wants cookies anymore, then the number of cookies in the economy is still going down.
And you might also ask - well, why would people not want cookies (money)? Well, the answer is that of course, you aren't getting this money "free." When banks create new money, it's because they are giving out loans. So money is "created" when someone borrows money from the bank, and the bank increases the number in their computer corresponding to the borrowers bank account - magically money has been created. So even if the fed were to "bake cookies directly," what that would really mean is that you could go to the federal reserve and get a loan from them directly. And if you don't want a loan, then it doesn't matter who offers it to you, you still don't want it!
Anyways, that's my analogy to try to illustrate why - while the fed may be able to limit inflation, it isn't really able to stop deflation (if people get sick of cookies, eg being in debt).
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