ECON 2200 Lecture Notes - Lecture 19: National Monetary Commission, Federal Reserve System, Commercial Bank
16 Dec 2016
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Document Summary
No centralized control; uncoordinated fractional reserve system (sb had less regulations: limited restrictions on nbs, regulation of sbs varied by state, but was typically minimal, no nation-wide banking system. No bankers" clearinghouse: facilitates transfer of money between banks to clear balances. No lender of last resort: extends credit to banks experiencing reserve. Little ability to regulate money supply (especially after widespread use of demand shortages deposits: see p. 358-359: predictable, seasonal changes in money demand and impact on interest rates. Uneven distribution of banks and money: 1877 nb note circulation: 13 cents per cap in ar limited credit in rural areas & south. Susceptibility to panics & runs: country banks & the call-loan (lender can demand repayment at any time) market. Benefit: allocated country banks" excess reserves to urban centers where they could support loans for manufacturing. Cost: local problems of country banks could become widespread problems. ****no centralized way to exercise monetary policy: today, monetary policy is used to.
