Printing money when fed buys gov debt o oct 1979 fed

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Printing money- when FED buys gov debt o Oct 1979- FED would no longer buy debt MS went down Recession · Late 1999- MS went up a lot b/c people wanted to take their money out of the bank before Y2K · 2001-2002: MS went up and interest went down
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12/2 Cash accounts for 15% of transactions · National Bureau of economic research declared that we are in a recession · Went 6 years in the expansionary phase(01-12/07) · Stock market went down 700 points when they announced the recession · ***3 biggest currencies are $, Yen, and Euro o Dollar is depreciating (weakening) compared to yen o Dollar is appreciating compared to Euro o Europe is keeping interest rates high, U.S. is lowering them o What is relationship between yen and Euro????? · Assets= liab (external) + owner’s eq. (internal, network) · Liquidity- the ease with which an asset can be converted into cash w/o loss of value o Cash is most liquid · Default risk- someone who might default on their loan o Higher for individuals than it is for businesses · Gov borrows thru gov securities (T notes, T bonds, T bills) · Diversified loan portfolio- having money spread out, not all in one thing · Demand deposit (DD)- checking account · Cash is a sterile asset, doesn’t reproduce, return is 0% · 1776-1914 is the unregulated banking era o There was no central bank, so they could do what they wanted, no rules or guidelines o Kept about 2% of DDs as reserves · Solvency- able to pay debt in full amount on time o Solvency vs. profitability is a big thing for banks · Central bank in U.S. o U.S. Bank was the first central bank, 1820s-1830s o Andrew Jackson (war of 1812)- vetoed the U.S. bank b/c it was located in NYC 12/4 Southerners thought the central bank in NYC would favor the North’s industrial ·
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