Central bank

RECENT NEWS
The Times of India  8 hrs ago  Comment 
Central Bank of India will raise up to Rs 6,500 crore this fiscal through various means, including preferential issue or follow on public offer. The decision was taken by board of directors at a meeting held today.
Reuters  May 22  Comment 
China's central bank will continue to implement reasonable adjustments to monetary policy while keeping it neutral with a tightening bias, People's Bank of China (PBOC) advisor Sheng Songcheng said.
Financial Times  May 21  Comment 
Clarification sought on ownership and pricing in $4tn exchange traded fund market
MarketWatch  May 17  Comment 
Minneapolis Fed President Neel Kashkari delivered a speech on monetary policy and bubbles, in which he argued that bubbles are both hard to spot with confidence, and that central bank officials in any case should act very cautiously.
Reuters  May 16  Comment 
Australia's central bank was confident core inflation would pick up by early 2018, but worries about a subdued labour market amid soaring household debt forced it to stand pat on rates earlier this month.
Reuters  May 13  Comment 
Pakistan's central bank has granted government-run Bank of China a licence to operate in the country to ease the financial requirements of Chinese-led "Belt and Road" projects, the central bank said on Saturday.
MarketWatch  May 11  Comment 
London stocks close with whimper after central bank trims economic forecast
Wall Street Journal  May 10  Comment 
Central banks have been the world’s biggest buyers of government bonds, but may soon stop—a tidal shift for global markets. Yet investors can’t agree on what that shift will mean.




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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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