Money and the Banking Industry
By: Andrea Neal
History of Banking
History of Banking Cont...
Economists today measure the money supply in one of two ways. M1 or M2. M1 is the measurement of the money supply that includes only fiat money and demand deposits such as checking accounts. M2 consists of fiat money, demand deposits, and near money. Currently, the US money supply is 4,028,362. This means that that much money was in circulation in the US during the month of September 2015. This all ties into banks and the way money is measured. Banks provide services to help our needs such as:
- Checking and Savings Accounts
- Retirement Accounts
- Credit Cards
- Alternative Investments – such as mutual funds and other securities
- Financial Management
- Safe Deposit (a box inside a vault in a bank to keep important papers or valuables) services
- Various types of consumer loans
On the other hand, banks are also in the game to make a profit. They make a profit through the amount of interest they collect on loans. When a loan is given to an individual, an interest amount is tied onto that loan in which they make what they give back as well as extra for providing the loan in the first place.
There are also different institutions in which deposits, loans and insurance all come into play.
Depositary Institutions- accept and manage deposits and make loans
Contractual Institutions- insurance companies and pension funds.
All of these different terms can be exchanged through paper money, bank slips, in person, or online. The online portion of banking has taken the world by storm. Online banking provides consumers with a convenient method of conducting bank business from the comfort and security of their own devices- something individuals today take advantage of due to the developments of technology in recent years.