Central Bank

RECENT NEWS
Wall Street Journal  3 hrs ago  Comment 
Creditors owed billions by Argentina can’t seize the assets of its central bank, a U.S. court ruled, reversing an earlier ruling that would have opened the nation’s reserves to hedge funds looking to collect debt stemming from a 2001 default.
Financial Times  11 hrs ago  Comment 
Structural forces limiting growth and inflation are not being addressed
Financial Times  Aug 30  Comment 
Price growth has doggedly lagged behind the Fed’s expectations
The Economist  Aug 30  Comment 
THE sudden burst of stockmarket volatility last week follows a period of relative calm, as noted in the last post. Much of that calmness must be down to central banks and their willingness to interfere in the markets to suppress long bond yields...
guardian.co.uk  Aug 30  Comment 
Alarming data from China was met with a soothing hint about monetary policy. But treasuries cannot keep pumping cheap credit into a series of asset bubbles Like children clinging to their parents, stock market traders turned to their central banks...
Benzinga  Aug 29  Comment 
Carstens Expects US Hike To Devalue Peso But It Ok With That If It Means The Recovery Is Strong © 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Reuters  Aug 28  Comment 
China's central bank is highly likely to ease monetary policy again by the end of this year, according to economists surveyed by Reuters, as it seeks to support a rapidly cooling economy and calm financial markets.
The Hindu Business Line  Aug 28  Comment 
China's yuan rose sharply against the dollar on Friday, with traders citing large transactions by state-owned banks on behalf of the central bank to support the currency. “There were clear...




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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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