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    Paul Heyne Banca Comercial

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    Paul Heyne Banca Comercial

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    4 views7 pages

    Miudocumento 673608 HeyneBancacomercial

    Uploaded by

    Edgar OR
    Paul Heyne Banca Comercial

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 7
    342 Chapter Fourteen to bank notes storage of valuables. The receipts that the goldsmiths issued were perhaps the first form of paper money. Why should a buyer go to the trouble and risk of withdrawing his gold bars from the goldsmiths vault in order to pay a seller, who would then have to incur the cost of returning them to the goldsmith for storage? Why not just hand the seller his receipt? When commercial banks arose and began accepting deposits of coined money, the bankers quickly saw that they could lend out at interest some fraction of the money deposited with them because only a few of the owners of these deposits would ever come in at one time to withdraw their money. Moreover, why lend borrowers the actual gold or silver coins? Receipts would serve just as well and perhaps even better. This was the origin of most bank notes, the direct ancestors of our current paper money. A bank note was a piece of paper, ornately printed to frustrate counterfeiters, promising to pay to the bearer a specified quantity of metallic money. Look at the paper money in your possession and you will discover that it’s comprised entirely of bank notes, issued by one of the 12 Federal Reserve banks in the United States. Until these notes were redesigned in the late 1990s, the round seal to the lef of the portrait that appears on the note always gave the name of the spe bank that had issued it. The major difference between these bank notes and the ones that made up most of the paper money in the United States (and other nations of the world) until about 150 years ago is that now they tend to be issued exclusively by government-managed banks and they do not promise to pay the holder anything. The Myth of Fiat Money ‘The Latin word fiat means “let it be” or “let it become.” There are quite a few people today who complain bitterly about the {a that the national government has, or so they allege, turned all ot money into mere fiat money. Our paper money isn't real money at all, they say; it’s just paper that the government has turned money by an arbitrary declaration. The old privately issued ba notes were not mere fiat money because they were receipts {6 silver or gold, and they obtained their value from that “backin: The objectors consider this an abuse of governmental authori fraud that has allowed the government to enrich itself by print money to finance its extravagances in disregard of the fact th: the more paper money it prints, the lower the value of the mor held by its citizens Although this argument is partially correct it obscures a fundamental fact about money. No one, not even a powerlul government, can turn something into money merely by fiat it makes anything money is that it is in fact accepted and used people as a mediuin of exchange. Federal Reserve notes are ere the United States not because the government says so but because the people of the United States are willing to accept them in payment for the sale of goods and repayment of debts. Governments around the world have discovered that if they print too much of their paper money, their citizens will become reluc- tant to accept it and something else—often United States Federal Reserve notes—will become the preferred medium of exchange within their borders. The Nature of Money Today All this is intended as a prelude to a true and important assertion: What we use today as our medium of exchange consists almost entirely of the IOUs of trusted institutions. What do we use in the United States today as our medium of exchange? Most people who think about money think immediately of those green pieces of paper, called Federal Reserve notes, and of coins in various sizes and colors. Economists lump these together and call it the currency component of the money supply. The Federal Reserve notes, by far the larger portion of the currency, are all [OUs—the accountants’ term is liabilities —of Federal Reserve banks. When the Federal Reserve banks were first established, their notes were accepted because they bore a promise to pay “lawful money” on demand. No one much noticed or cared when those words were taken off the notes, because by that time the notes themselves had become “lawful money.” Are there any substitutes for cash? Well, as we insisted way back in Chapter 3, there are substitutes for everything, including cash money. In fact, the most widely used medium of exchange is not cash but checkable deposits: deposits in financial institutions that can be transferred to others through the writing of a check. The most familiar type of checkable deposit is the money in an ordinary checking account with a commercial or “full-service” bank, which bankers call a demand deposit because it can be withdrawn on demand. These deposits are also 10Us or liabilities, liabilities of the particular banks in which the deposits are held. Your bank owes you the money in your checking account. American businesses and households pay for most of their transactions by writing checks, that is, by telling their bank to stop owing, them a certain amount of money and to start owing that amount to the party to whom the check is written Students often have trouble at first in seeing that checkable deposits really are money in the full sense of the term. They themselves may handle all their transactions by means of currency. When they receive a check, they cash it; that is, The essential characteristic of moncy #5 acceptability. Bae, Money What we use: bank notes (ce, cash) plus Aeposits heckable Sar Chapter Fourteen Te they obtain currency for the check and spend the currency. But student habits are in no way typical of the transaction proce- dures employed by business firms, government units, and households. The overwhelming majority of exchanges, meas- ured in dollar value, employ checkable deposits as the medium of exchange. Purchasers instruct their banks to transfer owner- ship of a portion of the purchasers’ deposit to sellers. They write a check, in other words. Sellers typically deposit the checks rather than cash them, thereby instructing their own banks to collect the ownership whose transfer was ordered by the check writer, No currency at all changes hands. The bank in which the check is deposited makes an entry in its books; the bank on which the check is written makes an equal but opposite entry in its books. What Federal Reserve notes and checkable deposits have in common, in addition to the fact that they comprise almost all of the medium of exchange in the United States, is that they are basically liabilities of trusted institutions. And why is this so important? Because it begins to indicate the difficulty of controlling the quantity of money in a society. The quantity of the medium of exchange in the society can be expanded by any i ion that can persuade people to hold and circulate its liabilities. Private as well as public institutions that are able to do this have the ability to create money. So How Much Money Is Out There? The Federal Reserve calculates what is called M1, or the narro defined money stock, as the sum of currency in circulation demand deposits, other checkable deposits, and traveler's che Table 14-1 gives you some notion of the magnitude of this st and how it has changed from year to year. The quantity of n in the economy can and does fluctuate considerably from

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