Central Bank

RECENT NEWS
The Times of India  Jul 26  Comment 
tate-run Central Bank of India today reported over eight-fold rise in net profit to Rs 192 crore for the quarter ended June 30 on low base in the year-ago period when it had reported Rs 22 crore net profit.
SeekingAlpha  Jul 25  Comment 
Do the economic powerhouses think the global economy is getting better? Not if you look at the amount of gold they're hoarding. Over the last few years, central banks around the world have been on a buying spree; they are now the largest single...
Reuters  Jul 24  Comment 
After injecting trillions of dollars into the global financial system over the last six years, the world's central bankers now face a vexing question: why is so little of it showing up in workers' paychecks?
The Economic Times  Jul 24  Comment 
"In general, the movement will be towards more liberalisation rather than away from liberalisation, but we have to do it at our pace".
Wall Street Journal  Jul 24  Comment 
Brazil's central bank gave a strong signal that it isn't considering a rate reduction this year in light of continued inflationary pressure.
SeekingAlpha  Jul 24  Comment 
By David Beckworth: Apparently, it is open season on market monetarists. The red dots you see on our chest are from the laser scopes on the new keynesian guns of Tony Yates, Simon Wren-Lewis, and Paul Krugman. These individuals have been firing...




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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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