money & banking. money functions of money medium of exchange exchange $ for g & s ...
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Functions of Functions of MoneyMoney
Functions of Functions of MoneyMoney
Medium of exchangeMedium of exchangeExchange $ for g & sExchange $ for g & s
Standard of valueStandard of valueAllow for value comparisonAllow for value comparison
Store of valueStore of valueSaving for future useSaving for future use
Medium of exchangeMedium of exchangeExchange $ for g & sExchange $ for g & s
Standard of valueStandard of valueAllow for value comparisonAllow for value comparison
Store of valueStore of valueSaving for future useSaving for future use
Characteristics of MoneyCharacteristics of MoneyCharacteristics of MoneyCharacteristics of Money
Our $ is generally acceptableOur $ is generally acceptable Can be counted and measured Can be counted and measured
accuratelyaccurately DurableDurable ConvenientConvenient Inexpensive to produceInexpensive to produce Easy to control supply in our Easy to control supply in our
economyeconomy
Our $ is generally acceptableOur $ is generally acceptable Can be counted and measured Can be counted and measured
accuratelyaccurately DurableDurable ConvenientConvenient Inexpensive to produceInexpensive to produce Easy to control supply in our Easy to control supply in our
economyeconomy
The Value of Our The Value of Our CurrencyCurrency
The Value of Our The Value of Our CurrencyCurrency
Our currency has a value because Our currency has a value because the government says it does!!the government says it does!!
Our currency has a value because Our currency has a value because the government says it does!!the government says it does!!
Kinds of MoneyKinds of MoneyKinds of MoneyKinds of Money
CurrencyCurrency
Checks (= demand deposits)Checks (= demand deposits)
Traveler’s checksTraveler’s checks
CurrencyCurrency
Checks (= demand deposits)Checks (= demand deposits)
Traveler’s checksTraveler’s checks
Banks and the Money Banks and the Money Supply Supply
Banks and the Money Banks and the Money Supply Supply
Money supply– total amount of $ Money supply– total amount of $ available for use as a medium of available for use as a medium of exchangeexchange
Banks– VITAL in our economyBanks– VITAL in our economy
Banks hold currency and offer Banks hold currency and offer demand deposit servicesdemand deposit services
Money supply– total amount of $ Money supply– total amount of $ available for use as a medium of available for use as a medium of exchangeexchange
Banks– VITAL in our economyBanks– VITAL in our economy
Banks hold currency and offer Banks hold currency and offer demand deposit servicesdemand deposit services
Bank ServicesBank ServicesBank ServicesBank Services Checking accountsChecking accounts
Easy…secure..good recordsEasy…secure..good records Savings accountsSavings accounts
NOT a demand deposit… notice for large NOT a demand deposit… notice for large withdrawals requiredwithdrawals required
Earn interestEarn interest Allow banks to make loansAllow banks to make loans
LoansLoans Most important role in economyMost important role in economy An amount of $ borrowed for certain An amount of $ borrowed for certain
period of timeperiod of time Pay $ back PLUS interestPay $ back PLUS interest Helps economy to grow… helps people to Helps economy to grow… helps people to
start or expand businessesstart or expand businesses
Checking accountsChecking accounts Easy…secure..good recordsEasy…secure..good records
Savings accountsSavings accounts NOT a demand deposit… notice for large NOT a demand deposit… notice for large
withdrawals requiredwithdrawals required Earn interestEarn interest Allow banks to make loansAllow banks to make loans
LoansLoans Most important role in economyMost important role in economy An amount of $ borrowed for certain An amount of $ borrowed for certain
period of timeperiod of time Pay $ back PLUS interestPay $ back PLUS interest Helps economy to grow… helps people to Helps economy to grow… helps people to
start or expand businessesstart or expand businesses
Banks are a MAJOR business Banks are a MAJOR business in our economy.in our economy.
Banks are a MAJOR business Banks are a MAJOR business in our economy.in our economy.
Other Financial Other Financial InstitutionsInstitutions
Other Financial Other Financial InstitutionsInstitutions
Savings & Loans associationsSavings & Loans associations Functions like banksFunctions like banks
Mutual Savings banksMutual Savings banks Owned by depositors where profits Owned by depositors where profits
are paid to themare paid to them Credit UnionsCredit Unions
Serves ONLY its membersServes ONLY its members Members usually work for one Members usually work for one
company or a unit of governmentcompany or a unit of government
Savings & Loans associationsSavings & Loans associations Functions like banksFunctions like banks
Mutual Savings banksMutual Savings banks Owned by depositors where profits Owned by depositors where profits
are paid to themare paid to them Credit UnionsCredit Unions
Serves ONLY its membersServes ONLY its members Members usually work for one Members usually work for one
company or a unit of governmentcompany or a unit of government
The The Federal Federal Reserve Reserve SystemSystem
The The Federal Federal Reserve Reserve SystemSystem
Need for Gov’t RegulationNeed for Gov’t RegulationNeed for Gov’t RegulationNeed for Gov’t Regulation
Created in 1913 by Created in 1913 by CongressCongress
Regulates banks activities Regulates banks activities to avoid widespread to avoid widespread financial hardshipsfinancial hardships
Citizens demand that the Citizens demand that the government regulate government regulate because banks closed and because banks closed and customers lost moneycustomers lost money
Created in 1913 by Created in 1913 by CongressCongress
Regulates banks activities Regulates banks activities to avoid widespread to avoid widespread financial hardshipsfinancial hardships
Citizens demand that the Citizens demand that the government regulate government regulate because banks closed and because banks closed and customers lost moneycustomers lost money
How the Fed is OrganizedHow the Fed is OrganizedHow the Fed is OrganizedHow the Fed is Organized Federal Reserve DistrictsFederal Reserve Districts
12 districts… NC in district 5-- Richmond12 districts… NC in district 5-- Richmond
Federal Reserve DistrictsFederal Reserve Districts 12 districts… NC in district 5-- Richmond12 districts… NC in district 5-- Richmond
Run by a Board of GovernorsRun by a Board of Governors 7 members- appointed by President for 7 members- appointed by President for
14 year terms14 year terms Open Market CommitteeOpen Market Committee
7 (B of G) and the presidents of 5 FR Banks7 (B of G) and the presidents of 5 FR Banks Regulate nation’s $ supplyRegulate nation’s $ supply
Federal Advisory CouncilFederal Advisory Council 12 bankers (private)– one from each 12 bankers (private)– one from each
districtdistrict Advise B of G and Open Market Council on Advise B of G and Open Market Council on
nation’s business and banking problemsnation’s business and banking problems
Run by a Board of GovernorsRun by a Board of Governors 7 members- appointed by President for 7 members- appointed by President for
14 year terms14 year terms Open Market CommitteeOpen Market Committee
7 (B of G) and the presidents of 5 FR Banks7 (B of G) and the presidents of 5 FR Banks Regulate nation’s $ supplyRegulate nation’s $ supply
Federal Advisory CouncilFederal Advisory Council 12 bankers (private)– one from each 12 bankers (private)– one from each
districtdistrict Advise B of G and Open Market Council on Advise B of G and Open Market Council on
nation’s business and banking problemsnation’s business and banking problems
How the Fed is Organized How the Fed is Organized cont’dcont’d
How the Fed is Organized How the Fed is Organized cont’dcont’d
Functions of the FedFunctions of the FedFunctions of the FedFunctions of the Fed Provide ServicesProvide Services
Collects and clears checksCollects and clears checks Wire $-- FedwireWire $-- Fedwire Supply currency to banksSupply currency to banks
Government’s bankGovernment’s bank Store tax money paid by citizensStore tax money paid by citizens Gov’t checking accountsGov’t checking accounts Federal gov’t debt recordsFederal gov’t debt records Bonds (!!)Bonds (!!)
Supervise banksSupervise banks Sets minimum amount of funds that must Sets minimum amount of funds that must
be kept on depositbe kept on deposit
Provide ServicesProvide Services Collects and clears checksCollects and clears checks Wire $-- FedwireWire $-- Fedwire Supply currency to banksSupply currency to banks
Government’s bankGovernment’s bank Store tax money paid by citizensStore tax money paid by citizens Gov’t checking accountsGov’t checking accounts Federal gov’t debt recordsFederal gov’t debt records Bonds (!!)Bonds (!!)
Supervise banksSupervise banks Sets minimum amount of funds that must Sets minimum amount of funds that must
be kept on depositbe kept on deposit
Functions of the Fed Functions of the Fed cont’dcont’dFunctions of the Fed Functions of the Fed cont’dcont’d
Makes loans to banksMakes loans to banks Charge banks a special interest rate Charge banks a special interest rate Protect individuals and businesses that Protect individuals and businesses that
use banksuse banks Truth in Lending LawsTruth in Lending Laws
Control money supplyControl money supply Controls nation’s money supply by Controls nation’s money supply by
influencing amount of $ people borrowinfluencing amount of $ people borrow
Makes loans to banksMakes loans to banks Charge banks a special interest rate Charge banks a special interest rate Protect individuals and businesses that Protect individuals and businesses that
use banksuse banks Truth in Lending LawsTruth in Lending Laws
Control money supplyControl money supply Controls nation’s money supply by Controls nation’s money supply by
influencing amount of $ people borrowinfluencing amount of $ people borrow
Inflation– rise in price of goods Inflation– rise in price of goods and servicesand services
Recession– slowdown in economic Recession– slowdown in economic activityactivity
controls money supply in order to controls money supply in order to keep a balance between inflation keep a balance between inflation and recessionand recession
Inflation– rise in price of goods Inflation– rise in price of goods and servicesand services
Recession– slowdown in economic Recession– slowdown in economic activityactivity
controls money supply in order to controls money supply in order to keep a balance between inflation keep a balance between inflation and recessionand recession
Banking HistoryBanking HistoryBanking HistoryBanking History
Early History:Early History: 11stst attempt - 1791 to 1836 attempt - 1791 to 1836 not successful -- States rights issuenot successful -- States rights issue Without a national banking system, Without a national banking system,
there were hundreds of different there were hundreds of different currencies and rapid inflation of currencies and rapid inflation of pricesprices
Early History:Early History: 11stst attempt - 1791 to 1836 attempt - 1791 to 1836 not successful -- States rights issuenot successful -- States rights issue Without a national banking system, Without a national banking system,
there were hundreds of different there were hundreds of different currencies and rapid inflation of currencies and rapid inflation of pricesprices
Banking History Banking History cont’dcont’d Banking History Banking History cont’dcont’d
National Banking Act of 1863National Banking Act of 1863 created a dual system of banks - created a dual system of banks -
both state and federal banks.both state and federal banks. uniform US currencyuniform US currency
National Banking Act of 1863National Banking Act of 1863 created a dual system of banks - created a dual system of banks -
both state and federal banks.both state and federal banks. uniform US currencyuniform US currency
Banking History Banking History cont’dcont’d Banking History Banking History cont’dcont’d
Glass-Steagall Banking Act 1933Glass-Steagall Banking Act 1933
Great Depression reactionGreat Depression reaction Created the FDIC to insure all Created the FDIC to insure all
deposits up to $100,000 … deposits up to $100,000 … changed in 2008 to $250,000changed in 2008 to $250,000
Helps prevent “runs” on banksHelps prevent “runs” on banks
Glass-Steagall Banking Act 1933Glass-Steagall Banking Act 1933
Great Depression reactionGreat Depression reaction Created the FDIC to insure all Created the FDIC to insure all
deposits up to $100,000 … deposits up to $100,000 … changed in 2008 to $250,000changed in 2008 to $250,000
Helps prevent “runs” on banksHelps prevent “runs” on banks
Banking History Banking History cont’dcont’d Banking History Banking History cont’dcont’d
Savings and Loan Crisis of the late 1980sSavings and Loan Crisis of the late 1980s The government relaxed regulations on The government relaxed regulations on
banks in the late 1970sbanks in the late 1970s Many banks failed due to bad Many banks failed due to bad
investments. investments. The United States government stepped The United States government stepped
in to bail out the S & Ls in to bail out the S & Ls It cost the government about $200 It cost the government about $200
billionbillion
Savings and Loan Crisis of the late 1980sSavings and Loan Crisis of the late 1980s The government relaxed regulations on The government relaxed regulations on
banks in the late 1970sbanks in the late 1970s Many banks failed due to bad Many banks failed due to bad
investments. investments. The United States government stepped The United States government stepped
in to bail out the S & Ls in to bail out the S & Ls It cost the government about $200 It cost the government about $200
billionbillion
Banking History Banking History cont’dcont’d Banking History Banking History cont’dcont’d
Gramm-Leach-Bliley Act of 1999Gramm-Leach-Bliley Act of 1999 Permits bank holding companies Permits bank holding companies
more freedom to engage in a more freedom to engage in a wider series of financial optionswider series of financial options
Forces banks to put in safeguards Forces banks to put in safeguards to protect your moneyto protect your money
Gramm-Leach-Bliley Act of 1999Gramm-Leach-Bliley Act of 1999 Permits bank holding companies Permits bank holding companies
more freedom to engage in a more freedom to engage in a wider series of financial optionswider series of financial options
Forces banks to put in safeguards Forces banks to put in safeguards to protect your moneyto protect your money