MONEY MONEY MONEY MONEY MONEY 4/25/2013

Transcription

1 Goal is to solve as many of the clues in the given amount of time Buzzword is contained in the answer to each clue Ex: Buzzword = Apple New York s nickname The Big Apple 1. Currency is the basis of everything evil Money is the root of all evil 2. Cover-up scheme for crime earnings Money laundering 3. Cash speaks Money talks 4. Dollars don t sprout in the forest Money doesn t grow on trees 5. Fortune that originated generations ago Old money 6. Correct; accurate On the money 7. Hours equal dollars Time is money 8. Put up or shut up Put your money where your mouth is 9. Capture the dough and dart Grab the money and run 10.Dispense cash down the pipes Pour money down the drain 11.Comical cash Funny money 12.Currency to be on fire Money to burn 1

2 13.Squander funds like h20 Spend money like water 14.Furnish somebody a sprint for their money Give someone a run for their money 15.Simple dollar Easy money The Evolution, Functions and Characteristics of Money Today s Objectives Trace the evolution from barter to money Describe the characteristics of money Describe the functions of money Identify the properties of ideal money Barter Economy Moneyless economy that relies on trade or barter Barter is a type of trade in which goods or services are directly exchanged for other goods and/or services, without the use of money Problems with the Barter System? Barterers agreeing on an exchange rate Greater specification increased the transaction costs 2

3 Definition: Money is anything that is widely accepted as payment for goods and services and repayment of debts. COMMODITY Commodity Money Money whose value comes from a commodity out of which it is made Anything that serves both as money and as a commodity Fiat Money Money that the government declares money Ideal Properties of Money 1. Durable 2. Portable 3. Divisible 4. Uniform Quality 5. Limited Supply Functions of Money 1. Medium of Exchange: something accepted by all parties as payments for goods and services 2. Measure of Value: allows it to serve as a common way to express value; standard to base prices 3. Store of Value: allows people to preserve value for future use 3

4 Broader Definition of Money M1: Component of the money supply relating to money s role as a medium of exchange includes coins and currency, traveler s checks, and checking accounts. M2: component of the money supply relating to money s role as a store of value including savings deposits time deposits, etc. The Development of Modern Day Banking Timeline Read pgs in textbook As a group, create a timeline poster using the given materials Be creative, colorful and include the following: Privately Issued Bank Notes State Banks Greenbacks The National Banking System Gold certificates Silver certificates Central Banks Federal Reserve System Great Depression Glass Steagall Act Main Idea:The United States experimented with many different kinds of money before it created the Federal Reserve System. THE DEVELOPMENT OF BANKING IN AMERICA At one time, banking was virtually unregulated. This led to abuses, and problems with the money supply eventually required the intervention of the government. 4

5 Development of Banking in America Privately Issued Bank Notes Problems with paper currency at the end of the Revolution Paper currency was worthless; people did not trust the gov t to issue anything except coins Federal gov t did not print currency until the Civil War Growth of State Banking: a bank that receives its operating charter from a state government New constitution allowed private banks to issue currency 1811 had about 100 state banks Banks issued their own currency Development of Banking in America Problems with Currency Each bank had their own currency in different sizes, colors and denominations Banks were tempted to issue too many notes because they could print more when they wanted People making their own money! By the end of the Civil War, 1,600+ banks and 10,000+ different forms of currency Development of Banking in America Greenbacks When the civil war erupted, Union and Confederate side needed to raise money to finance the war Congress printed paper money for the first time; $60 million No gold or silver backing; it was declared legal tender: fiat currency that must be accepted in payments for debts Development of Banking in America The National Banking System People feared the Greenbacks would become worthless too; stopped using them and Congress had to find other ways to fund the war 1863 Congress enacted the National Currency Act, which created a National Banking System made up of National Banks: privately owned bank that receive its operating charter from the federal gov t. They issued, national currency 1865 fed gov t forced state banks to become part of the National Banking System by placing a 10% tax on all Privately issued bank notes Problems Continued 1. National Banking System was having difficulty providing enough currency for the nation. 2. Checking accounts were becoming popular and the banking system was not designed to deal with this. 3. Minor recessions were causing problems for banks and other lending institutions. The Creation of the Federal Reserve System 1913 Federal Reserve System created as the nation s central bank: a bank that can lend to other banks in times of need To gain membership in the Fed, banks had to purchase shares of stock in the system Privately owned banks (not the gov t) own the Federal Reserve System Own currency called Federal Reserve notes; eventually replaced all other types of federal currency 5

6 Need for Federal Deposit Insurance 1929 Great Depression began No deposit insurance Bank run: sudden rush by depositors to withdrawal all deposited funds When the banks failed during the Great Depression, depositors lots all their savings Need for Federal Deposit Insurance 1933 The Banking Act (Glass Steagall Act) passed to strengthen the banking industry Created the Federal Deposit Insurance Corporation FDIC Reduced the number of bank runs Today, FDIC covers each account up to $250,000 Structure of the Federal Reserve System Board of Governors Fed is directed by a 7-member Board of Governors appointed by the President of the U.S. and approved by the Senate to serve a 14-yr term. Supervises and regulates the Fed Member Banks 12 District Banks Fed is privately owned by it s member banks They contribute funds and receive stocks into the Fed National Banks have to be members, state banks have a choice 1. Boston 2. New York 3. Philadelphia 4. Cleveland 5. Richmond 6. Atlanta 7. Chicago 8. St. Louis 9. Minneapolis 10.Kansas City 11.Dallas 12.San Francisco 6

7 Federal Open Market Committee Make decisions about the level of interest rates (monetary policy) 12 voting members 7 from Board of Governors President of the New York district Fed 4 district Federal Reserve bank presidents who rotate every year Advisory Committees 1. Federal Advisory Council Consists of one member of each 12 district banks Provides advice to the Fed concerning the overall health of the economy 2. Consumer Advisory Council 30 members meet with the Board 3 times/yr to advise on consumer credit laws Members consist of educators, consumer legal specialists, and representatives from consumer and financial industry groups. 3. Thrift Institution Advisory Council Representatives from savings and loan associations, savings banks, and credit unions Meets with the board 3 times/yr to advise on matters pertaining to the savings and loan industry Fractional Reserves and the Money Supply Fractional reserve system: banks are required to keep only a portion of their total deposits in the form of legal reserves Legal reserves: currency and coins that banks hold in their vaults, plus deposits at the Fed. Fractional Reserves and the Money Supply Reserve requirement: formula used to compute the amount of a depository institution s required reserve Member bank reserve (MBR): a deposit a member bank keeps at the Fed to satisfy reserve requirements. Excess reserves: legal reserves beyond the reserve requirement represents the bank s lending power and can be loaned out. What is Monetary Policy? Changes in the money supply in order to affect the availability and cost of credit. Easy Money Supply Expanding the money supply Lower interest rates borrowing is easy Stimulates the economy people buy more businesses expand more jobs Tight Money Supply Restricts the size of the money supply Higher interest rates Borrowing is difficult Slows economic growth People buy less Production is reduced Unemployment increases 7

8 Other Fed Responsibilities Maintaining the Money Supply Maintaining the Payments System Regulating the Payments System Regulating and Supervising Banks Preparing Consumer Legislation Acting as the Government s Bank George Washington Thomas Jefferson Abraham Lincoln Alexander Hamilton 8

9 Andrew Jackson Ulysses Grant Benjamin Franklin Instructions Get out your scavenger hunt from yesterday If you didn t get finished it is okay. It was a scavenger hunt! If you haven t completed the Chapter 14 review, be finishing it up now. Have You Ever Wondered About a $1 Bill? Plate Position Letters and Numbers The small capital letter and number appearing in the upper left corner, just below the denomination number on the bill, designate the position of the note on the 32-subject face plate from which it was printed. 9

10 Federal Reserve District Numbers The Federal Reserve Bank designation is repeated in the upper and lower right and left corners of the bill. The numbers and the letter indicate the Federal Reserve Bank the note is issued for, and are helpful in cases in claims made by the public for the redemption of burned or mutilated notes. Federal Reserve District Seal The Federal Reserve District seal also bears the name of the issuing Federal Reserve Bank and the letter designating that Federal Reserve district. A: Boston B: New York C: Philadelphia D: Cleveland E: Richmond F: Atlanta G: Chicago H: St. Louis I: Minneapolis J: Kansas City K: Dallas L: San Francisco Series Date The series date on the face of each bill signifies the year the design of a particular note originated, or when a major revision was made to the note design. A minor revision in the design is indicated by the addition of a letter to the series year Treasurer of the United States Signature Secretary of the Treasury Signature Serial Number The serial numbers are two identical series of numbers, including a prefix and suffix letter, located in the upper right and lower left sections of the note. On some notes a "star" note may replace the suffix letters. "Star" notes are substituted when a note is mutilated in the course of manufacture. To print another note with an identical serial number would be costly and time-consuming. A star note has an out-of-sequence serial number with a star as the final digit. Treasury Seal The Treasury Seal bears the date 1789, the year of the Department's creation. The balance scales represent justice; the key, an emblem of official authority; and the chevron with 13 stars, the 13 original states. On Federal Reserve notes the seal is overprinted in green. 10

11 Plate Serial Numbers The small digit or series of digits in the lower right corner on the face and back of the note indicates the serial number of the plate from which a note was printed. The letter preceding this number on the face is always the same as the plate position letter in the upper left corner. 11