real estate finance - full book (500 pgs)

In the united states paper currency federal reserve

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Unformatted text preview: ciety, not a debt society. This means that we spend money now and pay for the item later, and most the time we spend on borrowed money. In this chapter we will discuss the meaning of money, how is money/mortgage supplied, its flow and the mortgage market with emphasis on California mortgage market. MONEY & THE MONEY SUPPLY The quantity of money available in the United States for expenditures at any given time is called the “money supply”. Definition According to the Board of Governors of the Federal Reserve Bank System, money is anything that serves as a generally accepted medium of exchange, a standard of value, and a means to save or store purchasing power. In the United States, paper currency (Federal Reserve notes), coin, and funds in checking and similar accounts at depository institutions are examples of money. Our monetary system is based on standards of confidence. Our money stock can be categorized as M1, M2 or M3: Dynasty School (www.dynastySchool.com) 2-1 REAL ESTATE FINANCE M1 is the sum of currency held by the public, plus travelers checks, plus demand deposits, plus other checkable deposits (i.e., negotiable order of withdrawal accounts, and automatic transfer service accounts and credit union share drafts). M2 is M1 plus savings accounts and small–denomination time deposits (less than $100,000), plus shares in money market mutual funds (other than those restricted to Institutional investors), plus overnight Eurodollars and repurchase agreements. M3 is M2 plus large–denomination time deposits ($100,000 or more) at all depository institutions, large denomination term repurchase agreements, and shares in money market mutual funds restricted to Institutional investors. MORTGAGE MONEY – SUPPLY AND DEMAND As a commodity sought by borrowers, mortgage money is subject to the laws of supply and demand. As for any commodity, various factors affect the supply offered and the amount demanded, and thus the market price. SUPPLY The ultimate source of mortgage money is savings. This may be in the form of savings accounts, life insurance, corporate reser...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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