ECON 3K03 Lecture Notes - Lecture 11: Hsbc Bank Canada, China Construction Bank, Eurodollar

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The ecoznomics of money, banking, and financial markets. System: the free banking experiment, the provincial notes act, 1866, the dominion notes act, 1870. Gold standard: the first bank act, 1871, the bank act, 1881-1913, the finance act, 1914. Shadow banking system: shadow banking system bank lending replaced by lending via securities markets, a change in the financial environment will stimulate a search by financial institutions for innovations that are likely to be profitable. Flexible interest rates keep profits high when rates rise. Lower initial interest rates make them attractive to home buyers: financial derivatives. Payoffs are linked to previously issued (i. e. derived from) securities. Information technology: bank credit and debit cards. Improved computer technology lowers transaction costs: electronic banking. Atm, home banking, abm and virtual banking: junk bonds, commercial paper market. To transform otherwise illiquid financial assets into marketable capital market securities. Securitization played an especially prominent role in the development of the subprime mortgage market in the mid.

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