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Week 11.pdf

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York University
Administrative Studies
ADMS 1010
Eytan Lasry

Banking dates back to where there were no real currency other than goldSlide 3 o Only Netherlands and few other parts of the world was gold monitored as a commodity o Once and gold and silver emerged as key way to trade goldsmiths had to find way to store gold so use coin o Making more money storing gold than making it o To trade people gave note saying u can have this much of my moneyo So started thinking I can loan out goldo Origin of Fractional Reserve Banking o Banks have very lil money so cant withdraw all your money at onceSlide 4 o Banks then make money off the spread o Key about fraction reserve banking make lot of money off of small amount o Basically economic theory Slide 6 o Explains why u need dont lot of money in circulation rest are basically numbers in a computer recording itSlide 7 and 8 o Everyone loses faith then get run on bankbank run o Key aspect of gov regulation is central bankmade 193336 became crown corp o Banks have only fraction in reserve then the central bank acts as the overseer to ensure banks have sufficient liquidity to ensure banks have peoples deposits o If bank cant pay out its obligations then central bank can pay the outSlide 9 o In CDA central bank plays important role in issuing currency o ULTIMATE OBJECTIVE maintain inflation lot of money in circulation and price of things goes up o Why does CDA have deficit when Bank of CDA can print money Because that wud diminish value o Gov wants to ensure we have a predictable and stable rate of inflationo When deflation is even worse because no one spends thinking money will be worth more tom o Central bank also supervises bank industrySlide 10 o Money supply is how much money is in circulation o As Bank of CDA buys or loans money to other banks they lend money to people and thats how money supply increasesSlide 11 o Act of 1871 decision was made that CDA wud have banking systembrank banking system with few large national banko Benefits of brank banking system risk is spread out o Eg businesses go bankrupt in Nova Scotia then banks will lose money in NS but not in everywhere else in CDAo In US if one community tanks or one large customer is lost bank fails
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