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Week 11.docx

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York University
Administrative Studies
ADMS 1010
Alison Kemper

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 it themselves.  Why we needed the Cdn national railroadWW1 move troops and supplies, etremly expensive  Real risk of bank failuresbig nationalize of railroad  Great big booms and recessions like late 90s and early 20 century  High risk high returnsbanks getting caught  IDEAcentral bank take responsibility for regulation, intresest rates and managing money supply  Bank act approves 1934started 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 peoples investments.  Savings bondlong term saving investment  Low intrest rate—reduce incentive to save but increase incentive to invest  Centraal Bankissues 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 Policyhow much $$ we have and how expensive it is to borrow it.  Fiscal policy by govt monetary policy by the bankimpt 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.  FTA1988encourage economic growth  massive impact on Canadacore of decision is to sttempt to change from low growth era to high growth era.  Not raise income tax but raise tariffscost us 10$ more tariff important source of revunes  LITTLE BANGbanks 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 changesregulation, trade rule in 1880s  Peir trudeuin power, spending money on good things will result in good things happening for candians.  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
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