Central Bank

RECENT NEWS
MarketWatch  Apr 20  Comment 
Greece’s government issued a decree Monday requiring public bodies such as state-owned companies and public pension funds to transfer their cash reserves to the central bank.
Financial Times  Apr 20  Comment 
Investors see emerging market central bankers as doves. But they are likely to turn hawkish
The Hindu Business Line  Apr 20  Comment 
China stocks rose on Monday after the central bank cut banks' reserve requirements to combat slowing economic growth, helping to ease fears that regulators were set to crack down on riskier tradin...
Wall Street Journal  Apr 19  Comment 
China’s move to slash bank reserve requirements signals a greater sense of worry about the economy. It is also a sign officials are hardly concerned about blowing a stock-market bubble.
Forbes  Apr 18  Comment 
In Game of Thrones, the Seven Kingdoms of Westeros have no central bank. Why is this? And would one even be possible given the political economy of the known world? This post will address these question. As a disclaimer, my knowledge of the show...
MarketWatch  Apr 16  Comment 
Economic data in the first quarter has been soft and "murky," making achievement of the conditions for a first rate hike more uncertain, said Dennis Lockhart, the president of the Atlanta Fed, on Thursday. Lockhart said he would support "waiting a...
Wall Street Journal  Apr 10  Comment 
Russia’s ruble fell back from its strongest levels since December after the central bank said it would increase the interest rates charged at foreign-currency auctions.




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History

Central banks have emerged over the past four centuries when mankind moved from a system of gold or silver backed currencies to private issuers to fiat money. The first central bank in the world was the Swedish Riksbank, founded in 1668.

Scottish businessman William Paterson founded the Bank of England in 1694 on request of the British government to finance a war.

The First Bank of the USA was founded in 1791 and had a 20-year charter. It was however revived again in 1816 and gave birth to the Second Bank of the United States. This desperate move to stabilize the currency by US president James Madison was later revoked by US president Andrew Jackson who withdrew the bank's Federal Charter in 1836. In 1841 the Second Bank of the United States ceased all operations.

The history of central banking came alive again in 1913 with the constitutionally disputed foundation of the Federal Reserve.

As nearly all currencies in the world have transformed into fiat money over the past 4 centuries, i.e. the notes mandated to be used by government fiat, all countries have some sort of central bank that is responsible for keeping inflation low and provide a money supply that does not overshoot economic growth too much. Other tasks vary widely from country to country.

Political pressure has often led to inflation as rulers want to finance their activities with the in the first place seemingly cheap money.Image:Example.jpg

Central Banking

Central banks primarily purchase short-term debt issued by the governments of the countries in which they serve. Sometimes they've been used as a political piggy bank with the central banks buying riskier investments causing huge losses and inflation if the bank's government doesn't bail them out since the bank has no assets to sell to counter inflation, leaving to many banknotes in circulation.

References

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