Podcast Beta
Questions and Answers
What is the primary function of money according to the text?
What is one of the key characteristics of money, according to most economists?
How does lawyer-economist Louis Kelso view money?
What is the impact of contracts, private property, and credit arrangements on the economy, according to Louis Kelso?
Signup and view all the answers
What is the relationship between money and the economy, according to the text?
Signup and view all the answers
What is currency, according to the text?
Signup and view all the answers
What is the primary function of money in terms of property rights?
Signup and view all the answers
What is the relationship between money and human potential, according to the text?
Signup and view all the answers
What is the primary purpose of creating money through commercial banks and a central banking system?
Signup and view all the answers
According to the House Banking and Currency Committee, what was the intended main way for the Federal Reserve System to create bank reserves?
Signup and view all the answers
What is a consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?
Signup and view all the answers
What is the role of a monetary system in the economy, according to Louis O. Kelso and Patricia Hetter?
Signup and view all the answers
What is a potential consequence of having too little money in the economy?
Signup and view all the answers
What was the original intention of the Federal Reserve System when it was set up in 1914?
Signup and view all the answers
What can happen when the Federal Reserve System creates or cancels money as needed by the economy?
Signup and view all the answers
What is the relationship between the monetary system and the visible sector of the economy, according to Louis O. Kelso and Patricia Hetter?
Signup and view all the answers
What was the primary objective of monetizing 'eligible' short-term commercial paper?
Signup and view all the answers
What was the primary function of the Federal Reserve bank in the original design of the central banking system?
Signup and view all the answers
What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?
Signup and view all the answers
What is the primary benefit of an 'elastic' asset-backed reserve currency?
Signup and view all the answers
What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?
Signup and view all the answers
What is the primary characteristic of a central banking system as originally designed?
Signup and view all the answers
What is the primary risk of allowing the central bank to control the money creation process?
Signup and view all the answers
What is the primary benefit of using the money creation powers of the central bank to finance capital formation and acquisition by every person?
Signup and view all the answers
What is the primary function of money in terms of facilitating economic transactions?
Signup and view all the answers
What does money provide, according to the text, in terms of measuring economic input and output?
Signup and view all the answers
Which of the following is a characteristic of money, according to most economists?
Signup and view all the answers
What is the relationship between money and the economic system, according to the text?
Signup and view all the answers
What is the primary function of a monetary system, according to Louis O. Kelso and Patricia Hetter?
Signup and view all the answers
What is the primary intention behind creating money through commercial banks and a central banking system?
Signup and view all the answers
What is the primary function of money as a standard of value?
Signup and view all the answers
What is the consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?
Signup and view all the answers
What is the relationship between money and private property, according to the text?
Signup and view all the answers
What is the primary function of money as a common measure of value?
Signup and view all the answers
What is the relationship between the monetary system and the visible sector of the economy?
Signup and view all the answers
What is the primary objective of the Federal Reserve System when it was set up in 1914?
Signup and view all the answers
What is the primary function of money as a store of value?
Signup and view all the answers
What would happen if the Federal Reserve System creates or cancels money as needed by the economy?
Signup and view all the answers
What is the primary function of money in the economy, according to Louis O. Kelso and Patricia Hetter?
Signup and view all the answers
What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?
Signup and view all the answers
What is the primary goal of the 'Just Third Way' system of political economy?
Signup and view all the answers
How does the 'Just Third Way' system finance the future of the U.S. economy?
Signup and view all the answers
What is the role of the capital credit insurer in the 'Just Third Way' system?
Signup and view all the answers
What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?
Signup and view all the answers
What is the primary benefit of the 'Just Third Way' system?
Signup and view all the answers
How does a local commercial bank accept a loan contract from a citizen?
Signup and view all the answers
What is the role of the twelve regional Federal Reserve banks in the 'Just Third Way' system?
Signup and view all the answers
What is the primary mechanism by which the 'Just Third Way' system extends credit to citizens?
Signup and view all the answers
Study Notes
Central Banking System
- The system was designed to guide the banking system towards providing an adequate and stable money supply to meet the needs of industry and commerce.
- Member banks could obtain credit from the nearest Federal Reserve bank by rediscounting their "eligible paper" or getting advances from the Federal Reserve bank.
Role of Commercial Banks
- Commercial banks provide loans to businesses or other productive enterprises, a process called "discounting".
- The commercial bank then sells the qualified loan paper to the central bank, a process known as "rediscounting".
Money Creation
- The central banking system creates an "elastic", asset-backed reserve currency to stabilize the economy and facilitate commerce.
- The money creation powers of the central bank can be used to spread power around by financing capital formation and acquisition by every person.
What is Money?
- Money is anything that can be used to measure, and to represent, the value of something being offered to satisfy a debt, or being exchanged in the marketplace.
- Money can take many forms, including financial contracts, depending on how people exchange things they own or reasonably expect to acquire.
- Money is a social tool, an artifact of civilization invented to facilitate economic transactions.
- Money provides a means for securing the fundamental human right to acquire private property.
Characteristics of Money
- Money is a medium of exchange, a store of value, a standard of value, and a common measure of value.
- Currency or current money involves a commonly recognized determination of value, often regulated, but not necessarily created, by government.
Louis Kelso's Perspective on Money
- Money is a social tool for measuring values used for the exchange of property rights.
- Money is not a part of the visible sector of the economy; people do not consume money.
- Money provides a method of measuring obligations, rights, powers, and privileges.
The Purpose of the Central Banking System
- The system was designed to benefit everyone by allowing money to be created or cancelled as needed by the economy.
- The system was intended to ensure that there would never be too little money (resulting in deflation) or too much (causing inflation).
What is Money?
- Money can be anything that measures and represents value, and is used to satisfy debts or exchange goods in the marketplace.
- Money can take many forms, including financial contracts, and is a means to secure private property and facilitate economic transactions.
Functions of Money
- A medium of exchange
- A store of value
- A standard of value
- A common measure of value
Understanding Money
- Money is a social tool, not a physical factor of production, but a yardstick for measuring economic input and output.
- It provides a method of measuring obligations, rights, powers, and privileges.
- It allows individuals to accumulate claims against others or the economy as a whole.
Creating Money
- Money is created through commercial banks and a central banking system, such as the U.S. Federal Reserve System.
- The system is designed to benefit everyone, allowing money to be created or cancelled as needed by the economy.
The Just Third Way
- A proposed new system of political economy that aims to empower every person economically.
- It finances the future of the economy by giving every citizen an equal right and access to the financial system.
- It would provide no-interest credit to every citizen to purchase new shares in companies, with repayment coming from future profits.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz covers the role of Federal Reserve banks in providing liquidity to sound banks, restraining credit expansion, and guiding the banking system towards a stable money supply.