Money and Banking Industry

by: Faith Alvarez


Money is a medium of exchange, and its main functions are as stated, a medium of exchange, unit of account or measurement of the worth of goods and service, and finally to store value. The six characteristics of money consist of durability, portability, divisibility, uniformity, limited supply, and finally acceptability. Money's value comes from 3 different sources consisting of commodity money: things that have value in themselves, representative money: things that hold value because they can be exchanged, and fiat money: legal tender, and in the U.S. the value comes from nothing, except our own beliefs.

History of Banking

In 1791, The First Bank of United States' role was to establish credit, establish financial order, and resolve the issue of fiat currency. Furthermore, In 1832, Henry Clay, a strong proponent for banks tried rechartering the Bank, but Andrew Jackson, strongly distrusted it, and vetoed the campaign, thus a failure to launch the rechartering of the Bank. Later on, in 1913, The Federal reserve was created, and it served as the central bank for the U.S. And more recently, the Federal Reserves main purposes are to conduct the nation's monetary policy, supervise and regulate banks, maintain financial stability, and last provides financial services to different parts of the U.S.. The FDIC, or Federal Deposit Insurance Corporation, was later created in 1933, during the Great Depression, and it served to prevent another catastrophic downfall, by allowing them to intervene when necessary.

Banking Today

There are several ways in which economist measure money supply, however their primary way of measurement is monetary base, where they take the sum of money in circulation as well as reserve balances, and the current money supply in the U.S. stands at $4,028,362. Banks offer a multitude of services including:
  • Checking and Savings Accounts
  • Retirement Accounts
  • Mortgages
  • 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
The banks make their money through the depositors, by taking more interest from the customer than is paid, they make a profit. There are several types of financial instutions, including, but not limited to, commercial banks, investment banks, brokerages, investment companies, and far more. With electronic banking, the process of taking money out putting money in has become far more convenient for the customer, and requires little interaction, however to every pro there is a con, so with electronic banking criminal activity has increased, because it is seemingly easier to hack in and gather people's information.