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Topic 01 Selected Slides -- Introduction to International Banking

Topic 01 Selected Slides -- Introduction to International Banking

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FINS 3650 / 5550 International Banking Semester 2, 2011 Dr Bruce R Arnold [email protected] Re: FINSXX50 z3121234 [Topic]
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Money Creation (@ 20%) k i d Bank Deposited Lent Reserves A 100 00 80 00 20 00 100.00 80.00 20.00 B 80 00 64 00 16 00 80.00 64.00 16.00 C 64 00 51 20 12 80 64.00 51.20 12.80 D 51 20 40 96 and so forth 51.20 40.96
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The Money Supply b MB — ‘monetary base’: currency, reserves held with central bank M1 — + demand deposits, – reserves M2 — + savings deposits, small time deposits M3 — + large time deposits MZM — ‘money with zero maturity’: + money market funds
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Paul McCulley on Banking Th f b k l d d l “The genius of banking is maturity, liquidity and quality transformation: holding assets that are longer, less liquid and of lower quality than the funding liabilities ” of lower quality than the funding liabilities. “[N]ot just now, the last century or the century before that, b i i i i l h bli ’ d d but since time immemorial, … the public’s ex ante demand for assets that [can be immediately liquidated] at par is greater than the public’s ex post
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