The Major Powers Of The Central Bank Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1934 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? There was a time when money did not exist. Long ago, people at a stage called subsistence economy produced only what they needed. Their needs were few but their methods of production were such that they spent most of their living hours in an unceasing battle for personal survival. They had no need for money. Thus, they were engaged in a Barter System. However, the Barter System became very deficient and it was thought wise to introduce money. But who would control the money in the economy, thus the Central Bank came in play. Statement of Problem Money has been seen as a stepping stone for many economies as it contributes to the standard of living and facilitated lots of transactions during the past few decades years. However, it needs to be properly supervised or controlled to make sure there is not too much or too little available within the economy. It is therefore important to investigate the major powers of the Central Bank (whom controls the money supply) so that there is a right amount in the economy. Don’t waste time! Our writers will create an original "The Major Powers Of The Central Bank Finance Essay" essay for you Create order Review of Literature There are a number of alternative theories of how money is created, and generally emphasize endogenous money that money is created by internal workings of an economy, rather than external forces under whose rubric they thus fall. Chartalism, which holds that money is created by government deficit spending, and emphasizes (and advocates) fiat money. Chartalism is a monetary standard in which government-issued tokens are used as the unit of money. In such a system, fiat money is created by government spending. Taxation is employed to reclaim the money and control the total amount of fiat money in existence. Reclaiming most of this issued money via taxation is essential to maintaining its value in exchange. Modern Chartalism theory states that under a fiat money system, net currency is created by government through deficit spending. Because the issued currency is not tied to or backed by a commodity, currency can only be created when the government spends. Government may, or m ay not, ask for that currency back in taxes. The demand to hold and acquire this government issued currency is driven by taxes levied by the state which typically can only be paid in the state-issued fiat currency. (G.F. Knapp, 1920s) On the contrary, in the classical view, the central bank of a government creates money by purchasing government notes or bills through open market operations (this will be discussed later). Circuitist money theory, held by some post-Keynesians, who argues that money is created endogenously by the banking system, rather than exogenously by central bank lending. Further, they argue that money is not neutral. (Graziani 1989) Credit Theory of Money. This approach was founded by Joseph Schumpeter. Credit theory asserts the central role of banks as creators and allocators of money supply, and distinguishes between productive credit creation (allowing non-inflationary economic growth even at full employment, in the presence of technological progress ) and unproductive credit creation (resulting in inflation of either the consumer- or asset-price variety). Money supply remains one of the most controversial aspects of economics. Definition of Key Terms Central Bank The generic name given to a countrys primary monetary authority, such as the Federal Reserve System in the U.S. Usually has responsibility for issuing currency, administering monetary policy, holding member banks deposits, and facilitating the nations banking industry. The Money Supply is liquid assets held by individuals and banks. The money supply includes coins, currency, and demand deposits (checking accounts) or Money supply (monetary aggregates, money stock), a macroeconomic concept, is the quantity of money available within the economy to purchase goods, services, and securities. Monetary policy is the process by which the government, central bank, or monetary authority manages the money supply to achieve specific goals such constraining inflation, maintaining an exchange rate achieving full employment or economic growth. Monetarism is a set of views concerning the determination of national income and monetary economics. It focuses on the supply an d demand for money as the primary means by which economic activity is regulated. Monetary theory focuses on money supply and on inflation as an effect of the supply of money being larger than the demand for money. Open Market Operations are the buying or selling of Government bonds by the Central Bank in the open market. If the Central Bank were to buy bonds, the effect would be to expand the money supply and hence lower the interest rates; the opposite is true if bonds are sold. Reserve Requirements are a percentage of commercial banks, and other depository institutions, demand deposit liabilities (i.e. checking accounts) that must be kept on deposit at the Central Bank as a requirement of Banking Regulations. Though seldom used, this percentage may be changed by the Central Bank at any time, thereby affecting the money supply and credit conditions. If the reserve requirement percentage is increased, this would reduce the money supply by requiring a larger percentage of the banks, and depository institutions, demand deposits to be held by the Central Bank, thus taking them out of supply. As a result, an increase in reserve requirements would increase interest rates, as less currency is available to borrowers. This type of action is only performed occasional as it affects money supply in a major way. Analysis Money can be defined as anything that is generally accepted as a medium of exchange and settlement of debt. Functions of Money Medium of Exchange: anything that is readily acceptable as payment. Unit of Account: serves as a unit of account to help us compare the relative value of goods. Store of Value: a way to keep some of our wealth in a readily spendable form for future needs. Method of Deferred Payment: Allows people to delay paying for goods or settling debt, even though goods or services are being provide immediately. Definition of Money Supply The following definitions of money supply are based on U.S. definitions. Types of Money They are two types of money:- Commodity Money: something that performs the function of money and has alternative, nonmonetary uses e.g. gold, silver, cigarettes. Fiat Money: something that serves as money but has no other important uses e.g. coins, currency, check deposits. Money in an Economy Money Stock is th e quantity of money circulating in the economy. The different ways of measuring the money stock in an economy are: M1: Currency (coins and paper money) in the hands of the public + all demand deposits in deposit taking financial institutions + travelers checks + other checkable deposits M2: M1 + savings deposits + small time deposits (less than $100,00) + money market deposit accounts + other short term investments. M3: M2 + large time deposits (more than $100,000) M2 + M3 are considered near or quasi money since they cannot be easily used to purchase a good or service. NB: In the US is regarded as the narrowest form of money supply. The defining characteristic of this form of money is that it can be easily used to directly purchased goods and services. In England, the narrowest form of money supply is defined as M0 while the broadest is M4. M0: notes and coins in circulation, plus banks balance at the Bank of England. M2: M0 + residents sterling retail deposits with banks, building societies and National Savings. M4: M2+ both time and sight with banks and building societies. M4c: M4 + all foreign currency deposits held in UK banks and building societies by the UK non- bank private sector. In Guyana, the money supply is divided basically into two categories i.e. narrow and quasi money. Narrow money can be seen as M1 while narrow and quasi money together makeup M2 (broad money). Central Bank A countrys central bank is often seen as the bankers bank and is supposed to be independent of the government. The Central Bank is importan t because of the following functions: issuing currency setting reserve requirements lending money to banks provides for checking collection or clearing between banks fiscal agent to the government supervision of financial institutions controlling the money supply The major powers of the Central Bank that enable it to affect the Money Supply are:- Required reserve rate is lowered: The Central Bank can lower required reserve rate which raises the multiplier effect of high powered money (cash). The cash stays in the banks and each dollar can support more loans/demand deposits. For example, the required reserves went from 20% to 10 %, bank ACM would only need to hold $10,000 in reserves for the initial injection of $100,000. The other $90,000 would be loaned out so at each stage in the multiplier chain, the banks would be loaning out more funds and the eventual increase in the money supply would be larger. Discount interest rate decreases: The Central Bank can lower the discount rate and lower the costs for banks holding low excess reserves which will lower the excess reserve rate. If the Central Bank lowers the discount rate, or sets a lower federal funds target, this can be accomplished if the Central Bank injects funds into the system which will drive down the price of those funds interest rates Publics holding of cash changes: The Central Bank can raise confidence in banking system which will lower publics desire for holding cash. If you look at the high-powered money the Central Bank can inject into the system, a dollar in the hands of an individual is simply a dollar of money supply. A dollar in reserves at the banks, however, can support some multiple expansions of checking accounts. For example, when the required reserve rate was 10%, the $100,000 cash injection the system ultimately resulted in a $500,000 increase in checking account balances. Thus, if the Central Bank can move dollars from peoples pockets to banks, this will increase the money supply. In the Great Depression, one of the real problems was people lost confidence in the banks and took their cash out of the banks, a pattern that caused the money supply to decrease. When people want cash, the reserves in the banks fall which creates a bigger drop in demand deposits. The result is a net decrease in the money supply. For this reason you would expect every Christmas season the money supply would decrease as consumers want to hold more cash. To offset this, the Central Bank will need to get more cash into the system. Open market purchases: this is the Central Banks primary tool of monetary policy. The Central Bank can buy or sell government securities. For example, the Central Bank will contact its broker and announce it wants to buy $100,000 of government securities. The increase of $100,000 cash into the system will result in an increase in the money supply of $500,000. If the Central Bank wants to increase the money supply it will buy government securities, while if it wants to decrease the money supply it will sell government securities. The supply of money can only increase if the money is first printed by the issuer of money, usually the government central bank. The central bank prints coins and bills and electronic money (as mentioned in the functions of the Central Bank). Conclusion The researcher has concluded that the Central bank plays a significant role within the economy in controlling the supply of money. If the Money Supply is not properly attain to recessions and inflations will occur which will hinder the economic activities that the government is engaged. Furthermore, the major powers of the Central Bank, which were mention earlier, are important in regulating the supply of money.

The Dos and Donts of Lord of the Ring Essay Topics

The Do's and Don'ts of Lord of the Ring Essay Topics Here's What I Know About Lord of the Ring Essay Topics An argumentative essay is a certain kind of academic writing. Occasionally it's easiest to begin at the start and compose the introduction first. Read on if you'd love to learn a little about Tolkien's Middle Earth creation myth when contemplating ES6 subclassing. Whether this definition applies to you at this time, and you're panicking since you own a paper due tomorrow (okay, which means you've procrastinated just a bit on this paper), have a deep breath. The Number One Question You Must Ask for Lord of the Ring Essay Topics The color of a diamond is among the most significant parts of purchasing. To begin with, define the facet you wish to concentrate on. Consequently, the larger the diamond you get, the better clarity you might want to get. When you get to a single carat or bigger, you can begin to observe flaws more. What Does Lord of the Ring Essay Topics Mean ? You've approached the last portion of your essay. Inventing good narrative essay topics sounds like it would be quite easy, but it isn't as easy as you might think. There are lots of essay types, and at times the topic itself is as essential as the sort of the essay you're assigned. As everyone probably knows, simply because you've got a definition essay topic and a couple examples doesn't signify you've got an essay. To compose a great argumentative essay, there are four significant sections of the essay you're likely to have to know about. The 2 hobbits also share the identical birthday, September 22. It's important to select debatable argumentative essay topics since you need opposing points that you may counter to your own points. What Does Lord of the Ring Essay Topics Mean? Your essay should consist of recent statistics and data from reliable sources. The college essay is among the most essential facets of your college application. Remember your final grade significantly is based on the topic. It's therefore important to thoroughly consider different college essay topics. Writing a humorous essay is just one of the very best ways to continue to keep your readers engrossed. You must be very careful when choosing an essay topic. Researching the topic will permit you to find out more about what fascinates you, and should you pick something you really like, writing the essay will be more enjoyable. Moral argumentative essay topics are a few of the simplest to get carried away with. Vital Pieces of Lord of the Ring Essay Topics Like time, it doesn't have any start or an end. You won't be able to follow what's going on in case you start in the incorrect purchase. The ending is an important cliffhanger! It's because both items before it play part within this mith. The story is extremely thorough and detailed, giving the reader a crystal clear image of what is going on. Cause and effect essay topics In the event you receive a task to compose a cause and effect essay, you should examine some event or a specific circumstance and determine the link between the things which caused this circumstance and effects the case had or might have. If a particular word appears to be repeated all of the time, which may be an indication that the essay was written to catch the eye but not to offer legitimate, adequate content. A thing was crawling from the forest. The Essentials of Lord of the Ring Essay Topics You Will be Able to Benefit From Beginning Right Away The Lord of the Rings should unquestionably be watched in the appropriate order from starting to last. The trilogy was among the most important and most ambitious film projects ever undertaken. Tolkien was an extremely devout Catholic.

Martin Guerre Free Essays

The book â€Å"Martin Guerre† written by Natalie Zemon Davis’ is about a French peasant of the 16th century, who was at the core of an eminent case of masquerade.   Natalie Zemon Davis is a historian and an American feminist of early contemporary France. Her major interests are in cultural and social history particularly of those formerly disregarded by the historians. We will write a custom essay sample on Martin Guerre or any similar topic only for you Order Now In her book she discusses about the peasant life because according to her the most striking think about peasant life in sixteenth century, France was that marriage was primarily an economic and business relationship. It seemed to be used simply to unite familial lands and provide continuity in the family. Even though most, if not the entire, would presume the lives of peasants are unimportant in the superior system of things, the admired tale of Martin Guerre gives details of workers or peasants creating important, life-altering verdicts founded on egotism. The individual existance of the peasants does make a distinction. The author Natalie Zemon Davis narrates the story of peasants take care of themselves and seldom do they permit others to get in the way with their own aims, ambitions and objectives. She tries to fill in the fissure of the narrative with her personal view and opinion; even though, her judgment at times opposes the contemporaries of the tale. Numerous sources utilized by Natalie Davis are reasonably sound; but, several other sources elevate queries of their own genuineness and deep feeling. The novelist also takes a cavernous look into the lives of the peasants to investigate what coerces them and what so fervently fuels their idiosyncratic desires. The book details the life of the peasants in not only one specific place, but also details the customs of numerous places such as Hendaye, Artigat, and the court at Rieux in a contrast/compare style. It builds a world of stairs where those on the lowest rung are always looking somewhere higher up, yet they are always able to keep a taut rein on their lives. The characters of this tale are brought to a startling realism and gives details of every possible thought and action that could have led them down the path that they chose, and even speculates on alternatives to the choice they made. The author shows the life of the real Martin Guerre as full of regret and disgust at things gone wrong. His wife, Bertrande de Rols, is expressed as a manipulator that is always weighing her options and scheming to rise ahead. Subsequently, there is Arnaud du Tilh; without his appearance, no story would have likely taken place because it took a man of his shrewdness and his love of vice to create such a fantastical plot. Despite the fact that Arnaud was â€Å"the man for whom [Bertrande] felt†¦a great and joyous passion† (Davis 1983), she couldn’t stay contentedly with him. She was a very strong catholic who could not accept â€Å"the shadow of sin and danger which accompanied [Arnaud]†(Davis 1983), even though he made her happier than Martin ever could or would have. In an era where women were indeed oppressed in a male-dominated society, it is understandable that a woman like Bertrande would have feelings of anger towards her oppressors. It is certain that she feels anger and a kind of hatred towards Arnaud, saying that â€Å"[she] has not demanded his death, but now [she] must demand it† (Davis 1983). It is possible that Arnaud is ‘copping the brunt’ of all of her hardships that came about after Martin left her. A person might think that Bertrand’s triumph would at last bestow her liberty and trustworthiness. On the contrary, she is given the opposed â€Å"harsh, solitary justice†. No one in actual fact cares that she was true, and no one tries to stop her at the time she goes away. If ethical impartiality had been attained, she (Bertrande) would not have been in the place where she ended up. Frances and Joseph Geis elucidate comprehensively the traditions of family and matrimony during the 16th century. In the middle Ages, the majority of the peasants did not have proper matrimonial vows performed in church. As an alternative, they promise (or vow) to each other to reside as ordinary and bylaw wife and husband. Ceremony was not compulsory because peasants did not possess land; they worked on the property of the aristocracy as occupant cultivators or farmers. Matrimonial customs transformed in the 16th   century due to the peasant’s capability to possess property, due to which parents persevered on having further control over their progeny’s matrimonial options. â€Å"Love may do much, but money more.† This was a popular proverb among peasants in 16th century France. This quote characterizes peasant life in all aspects and the same has been described in the book. Though the world offered much to its citizens, the peasants always wanted more; they wanted more money, which would in turn, provide more power. Whatever is beneficial to them, they seek without regards as to the effects it would have on others. In this age of France, trade between villages and towns was bountiful. This emphasis put on business reveals the peasant motto â€Å"but money more†; many believed trading would bring them, greater riches and opportunity. Marriage was a major vessel used by peasants, by which they sought out power and wealth. One such example is the marriage of Bertrande de Rols and Martin Guerre. The Guerre’s attempted to use their son, Martin, to make connections with a significant, prominent family in the society of Artigat. They hoped that this new bonding would help them make vital connections to a higher class of peasant. Although it was shunned by most in the Catholic Church and by attorneys consensual marriage was legal and only required the bride and groom to agree on it. It was usually eschewed because it did not give the families any voice in the matter. However, most marriages were arranged by the parents. The main purpose of the marriage was to produce children; love was not a factor. The more children (especially males) a family has, the greater fortune it will likely bring to the family. A childless marriage was grounds for a divorce at this time; without children, a marriage, in essence, has no purpose. Many people simply did not find that their present situation was going well. Many departed themselves from reality by joining the army (this was common due to the current war between France and Spain). Others did not take such a drastic step; they simply picked up everything they owned and moved to a new village to start a new life in hopes of better fortune. Around this time, as ideas moved about rather swiftly due to peasant migration, Protestantism arose to challenge the authority of Catholicism. Peasants broke into church buildings and smashed images of the saints and other artwork. Protestantism found its fuel in its central doctrines: such as scripture being open to individual interpretation. Peasants saw these doctrines as loopholes and alternatives to the harsh, Catholic teachings. The courts, at this time, were attempting to instill the public with more conservative decisions that would favor marriage to divorce and put an emphasis on the familial unit, especially the children; this they did in hopes of ending decisions based solely on self-interest. There are scenarios where execution is used as a form of punishment for adultery. Davis accentuates the generalities of medieval life in France and also provides particularities, such as the property of Pansette staying within his family instead of going to the king, as was the custom. A desire to attain one’s own interests so eagerly is proven repeatedly by Davis as though she is obviously attempting to lead us in that direction by her outlook on this part of the past. BIBLIOGRAPHY Davis, Natalie, The Return of Martin Guerre, Harvard University Press, 1983, ISBN, 0 14 00,7593 3 Original Literary Source Lewis, Janet. Retour de Martin Guerre, Le       How to cite Martin Guerre, Essay examples