Central Bank

RECENT NEWS
Financial Times  Feb 19  Comment 
Dangerous to read too much into pages from the Fed or ECB
Wall Street Journal  Feb 18  Comment 
Heard on the Street: Central banks have crossed what was thought to be the final frontier: cutting interest rates to below zero. The longer such conditions persist, the greater the risk of perverse consequences.
Reuters  Feb 17  Comment 
REUTERS - Indonesia's central bank became the 18th to ease monetary policy this year, surprising markets on Tuesday by cutting interest rates in the face of tame inflationary pressures only three months after raising them.
Insurance Journal  Feb 17  Comment 
Ireland’s central bank said its probe into an accounting scandal at RSA Insurance Group plc’s Irish division is moving toward a conclusion and decisions on possible sanctions will be made once it’s completed. “An investigation into...
Financial Times  Feb 12  Comment 
Some experts worry people could hoard cash if rates remain negative
Wall Street Journal  Feb 12  Comment 
Norway’s central bank governor, Øystein Olsen, said he didn’t plan to introduce unconventional measures after the Swedish central bank announced negative rates and a bond-buying program.
MarketWatch  Feb 9  Comment 
Populist measures to restrict the Federal Reserve’s powers and open it up for greater scrutiny would be dangerous for the economy, said Fed Gov. Jerome Powell Monday.
guardian.co.uk  Feb 9  Comment 
Denmark insists it has ‘necessary instruments’, a day after central bank cut interest rates to weaken the krone Denmark has no plans to change its fixed exchange rate policy and the central bank has the tools to react “at any given...
Wall Street Journal  Feb 9  Comment 
The Outlook: Easing steps by central banks have ricocheted through foreign-exchange markets, driving the currencies of some countries down and those of others, primarily the U.S., up.




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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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