1. Chapter10: Money & Banking
The Everybody Bank

2. Three Uses of Money
Medium of Exchange: anything that is used to determine value during the exchange of goods and services
Unit of Account: means for comparing the values of goods and services
Store of Value: something that keeps its value if it is stored

3. Six Characteristics of $
Durability
Portability
Divisibility
Uniformity
Acceptability
Limited Supply

4. Sources of Money’s Value
Commodity Money: objects that have value in and of themselves, ex-cattle
Representative Money: have value because the holder can exchange them for something else of value, old school gold and silver certificates
Fiat Money: money backed by the gov’t

10. History of American Banking
Alexander Hamilton
First National Bank
Held $ for the govt
Carried out power to tax
Issued $-backed by gold and silver
1811 charter ran out
2nd Bank Chartered
Killed by Jackson

11. Free Banking Era 1837-1863 “Wildcat” Era State Chartered Banks
Often failed
Not enough gold and silver
Bank runs
Fraud
Inconsistent currency

12. Civil War
North-Greenbacks
South-currency backed by cotton-worthless

13. National Banking Acts 1863-1864 Three Powers to the Federal Government
Power to charter Banks
Required reserves of gold and silver at banks
Power to issue a single national currency

14. The Gold Standard Adopted in 1870’s
Paper $ was worth an equal amount in gold
Made $ valuable and stable
Made the money worth something-couldn’t print more bills than gold available

15. The Federal Reserve

17. The Fed Founded during the Wilson Administration in 1913
The First True Central Bank

18. Organization of the Fed
Member Banks-12 regional
Federal Reserve Board-appointed by the Pres…Ben Bernancke
Loan
Notes-$$$$$

19. Banking Reforms
FDIC
New Deal
FDR
100,000 per depositor

20. 70’s and 80’s…UH OH Savings and Loans Unregulated banks Bad Rates
Bad Loan
Fraud
People lost Billions on bad investments