Central Bank

RECENT NEWS
The Hindu Business Line  May 12  Comment 
Bank plans to raise ₹2,800 crore through FPO or QIP
MarketWatch  May 12  Comment 
New York Fed President William Dudley on Tuesday ruled our "explicit" cooperation with central banks from emerging markets about the precise timing of the U.S. central bank's rate hike. Instead, in a speech prepared for delivery to a policy...
New York Times  May 10  Comment 
Each institution is a creditor to Greece that expects it to repay billions of dollars of debt in the coming weeks.
Financial Times  May 10  Comment 
There has been a fundamental change in government bond markets, says David Oakley
Reuters  May 6  Comment 
Prime Minister Narendra Modi sank his finance minister's plans to strip powers from the central bank last week, sources told Reuters, evidence of a new-found respect for the bank's governor and a recognition that Modi needs his calming influence...
The Economic Times  May 5  Comment 
Australia's central bank cut its cash rate a quarter point to an all-time low of 2% on Tuesday, aiming to spur a sluggish domestic economy.
The Economic Times  May 4  Comment 
We have had a lot of volatile numbers and we have had flash crashes in the fixed income market, equity markets and the FX market.
The Hindu Business Line  May 3  Comment 
In 2014, they made the second highest purchase in 50 years




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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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