Money and Banking
money, history of banking, and banking today!
money is the current medium of exchange
money can: be used for exchange
be a unit of account
store value of wealth
be a unit of account
store value of wealth
6 characteristics of $$$
Durability
Acceptability
Portability
Divisibility
Uniformity
Limited Supply
Acceptability
Portability
Divisibility
Uniformity
Limited Supply
Value of Money-- where does it come from?
-From objects that have value (cattle, salt, precious stones) known as Commodity $
-Something with no value that can be exchanged for something with value (IOU) which is known as Representative $
-An order or decree (legal tender) known as Fiat $
The US uses fiat money to back up the dollar
-Something with no value that can be exchanged for something with value (IOU) which is known as Representative $
-An order or decree (legal tender) known as Fiat $
The US uses fiat money to back up the dollar
HISTORY OF BANKING
the First Bank of the United States was created in 1791
The Revolutionary war left the United States in debt and we needed a unified currency to help some of the states recover and the First Bank was created
Soon after in 1811 the First Bank lost chartering and the Second Bank was created. When president Andrew Jackson was asked to recharter the Second Bank in 1832 he vetoed it and it lost all federal funding
Soon after in 1811 the First Bank lost chartering and the Second Bank was created. When president Andrew Jackson was asked to recharter the Second Bank in 1832 he vetoed it and it lost all federal funding
the federal reserve
This is the central bank of the United States, created by the Congress to provide the nation with a safer, more flexible, and more stable system
Today the reserve does 4 things:
-influence money and credit conditions to keep stability
-supervises and regulates banks
-maintains and stabilizes the financial system
-provides financial services to the US government
Today the reserve does 4 things:
-influence money and credit conditions to keep stability
-supervises and regulates banks
-maintains and stabilizes the financial system
-provides financial services to the US government
banking today
how to measure $ supply
economists take into account everything under M3 which includes coins and currency in circulation(m1), small savings accounts and money market funds(m2), and large time deposits and large money market funds(m3)
The US current supply is 4,028,362
The US current supply is 4,028,362
Banking services
1. Accepting deposits
2. Granting loans
3. Providing safe deposit lockers & vaults
4. Sell Insurance Products
5. Sell Investment products like Mutual funds
How do banks make money??
Banks add interest to loans you take out or invest some of the money people deposited
Types of financial institutions
Commercial banks: Regular banks that protect deposits and hand out loans
Investment banks: Does a varity of services for businesses and the government
Insurance companies: helps individuals and companies preserve themselves and wealth
Brokerages: acts as a buffer between buyers and sellers to facilitate transactions
Investment companies: trust through which individuals diversify their investments
Effects of online banking
24 hour access!!
Increases criminal activity /:
Allows expansion past simple banking services