Central Bank

RECENT NEWS
Reuters  Feb 5  Comment 
Global markets have been in turmoil since the start of the year, with stocks and commodities prices reeling, eroding inflation and making central banks increasingly dovish -- a trend that could continue with more weak economic data.
The Economist  Feb 5  Comment 
CENTRAL banks have become the most powerful economic actors on the planet. In part, this is because governments have been so reluctant, since 2009, to use fiscal policy to stimulate their economies. In part, also, it is because the powers of...
BBC News  Feb 4  Comment 
Dominic Rossi, the head of global equities at Fidelity, says central banks have been 'too aggressive' when communicating over interest rates.
newratings.com  Feb 3  Comment 
WARSAW (dpa-AFX) - Poland central bank left its key interest rate unchanged on Thursday, after the first rate-setting session of the new policy-making body. The Monetary Policy Council of the National Bank of Poland, led by President Marek...
Financial Times  Feb 3  Comment 
Many economists see political pressure as a cause for concern
Reuters  Feb 2  Comment 
Azerbaijan's central bank said on Tuesday it had revoked the banking licence of Texnikabank, one of the oil-rich nation's 10 largest lenders by assets, and imposed temporary administration.
MarketWatch  Jan 31  Comment 
There’s never been a shortage of critics when it comes to QE, but financial markets have long reflected a lot of faith in central banks. Some fear that is starting to change.




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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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