Week 11 Last 50 weeks of Finance
Lower risk, lower return.
More intrrested in large banks that are centrally regulated then small banks that can fail easily.
After the bank act of 1871 the bank act was a proposal
The big banks didn’t want a central banker, controlling banking they thought they can handle
Why we needed the Cdn national railroadWW1 move troops and supplies, etremly expensive
Real risk of bank failuresbig nationalize of railroad
Great big booms and recessions like late 90s and early 20 century
High risk high returnsbanks getting caught
IDEAcentral bank take responsibility for regulation, intresest rates and managing money
Bank act approves 1934started working 1935-->Mckenzie King passed this policy
RESPONSIBILTIES OF THE BANK monetrary policy; sole issuer of Cdn bank notes and currency,
promotion of a safe finical system within Canada, funds management and central banking
services, “for the federal govt, bank and other clienets
All this $$ during the war what to do with it? Sell you a “victory bond” ppl got tiny intrest on
them and loan their $$ to govt to build weapons political and military risk which endangers
Savings bondlong term saving investment
Low intrest rate—reduce incentive to save but increase incentive to invest
Centraal Bankissues currency, regulates money; controls currency=say what the prime rate is,
the rate tht they will loan the money; \
Central bank is better if its separate from govt so no politicl interference
Fractional reserved banking
Less risk in govt and more risk inside the bank tht they manage on their own adv in Canada,
usa didn’t have that.
Bank of Canada manages currency risk and monetary supply, IR ., created economic growth in
Canada. , unemployment lower then US
Monetary Policyhow much $$ we have and how expensive it is to borrow it.
Fiscal policy by govt monetary policy by the bankimpt for those 2 to be in balance
If the price of money is really low they will jack up the pries of houses
Bank respsonisble for their shareholders
Tough if banks are independent becuz they will be accountable, but good cuz govt wont tell
them what to do every minute.
Central banks been in charge in mid 90s, constant growth until 2008.
FTA1988encourage economic growth
massive impact on Canadacore of decision is to sttempt to change from low growth era to
high growth era.
Not raise income tax but raise tariffscost us 10$ more tariff important source of revunes LITTLE BANGbanks permitted to enter Trust, investment banking, insurance and mutal funds.
(equities) (4 pillars) --> each are completely spate until 1987, govt didn’t wanted to manage risk
of each diff companies, what will work best is if we let them all work into one corporation let
forgein investment banks buy canadan banks. The bigger the finaicnal instiutions are the lower
the risk will be becuz they will be able to move the risks around. ( common ownership)
A lot of changesregulation, trade rule in 1880s
Peir trudeuin power, spending money on good things will result in good things happening for
In the 1990s prosperity slowed down.,cuz of high inflation and high intrest rates becuz had
to spend a lot of money in war, whole world end up with high inflation.
Problem of prosperty is that too much money going throught the govt instead of the private
sector.--> make sure eveyr