Money and Banking

The modern economy is highly globalized. Goods, services, and capital can flow between countries in a highly efficient manner. The price of a country’s currency relative to other currencies greatly affects that country’s economy.  The currencies of most industrial economies trade freely against one another. The foreign exchange market is the market where currencies are

Money is a commodity like any other and like other commodities, money can be lent by those with a surplus to those with a deficit. The price which those with surplus funds charge for the use of funds is called the interest rate.   The Loanable Funds Market  The supply of loanable funds ultimately comes from

In a market economy, prices play a leading role in allocating scarce resources. Prices fulfill this function by conveying information to buyers and sellers about the relative scarcity or abundance of goods and services. With price information, buyers and sellers alter their behavior in ways that bring about equilibrium – the state in which a

In this post, we discuss monetary policy and the role that central banks play in a modern economy. Although our focus is primarily on the U.S. central bank, the Federal Reserve, the policy tools which we discuss our similar to those used by other central banks, such as the European Central Bank, the Bank of

In part 1 of this blog series, I referenced the famous bank run scene in the movie It’s a Wonderful Life. In the scene, a mob of depositors gather around the Bailey Building and Loan and demand withdrawal of their deposits. George Bailey, the film’s protagonist, attempts to calm the crowd by telling them, “….

In this post, we provide a brief overview of the history of the U.S. monetary system and track its evolution towards our current monetary system.  Money in the Colonies  In colonial times, currency was in short supply. Since Britain did not allow the colonies to mint their own currencies, the colonists circulated a variety of

In part 1 of this series, I discussed the bank run scene in the movie It’s a Wonderful Life. In the scene, the depositors at the local building and loan lined up to withdraw their money from the institution. The protagonist, George Bailey, then uses his and his wife’s honeymoon money to pay out claims

In 2018, I put together a small booklet titled An Introduction to Money and Banking which I gave out to friends, potential clients, and anyone who I thought would be interested. One goal of mine was to provide readers with a better understanding of the U.S. central bank, The Federal Reserve, particularly in the aftermath