Money and Finance Overview

Money is a generally accepted medium of exchange in a society enabling trade without barter, and is also a store of value.

Money facilitates transactions by acting as an intermediary for goods and services.

The value of money depends on the collective agreement and trust in its worth.

Modern coins represent a value rather than their metal content's intrinsic worth.

Paper currency's worth is based on the trusted issuer (government) who backs the money's value, and the agreement that its worth is $x USD

Digital currency are recorded electronically, and exchanged as information.

Bitcoin is an investment, and not a generally accepted medium of exchange.

A shared consensus is critical for the value that currencies have. For example, if everyone agrees a $10 bill is worth $10, then that's its assigned value.

Potosi, in South America, was a major source of silver, making Spain wealthy and influencing European economies.

The Spanish colonial system in Potosi enslaved local people to extract silver, benefiting Spain rather than the Bolivian population.

The vast silver supply from Potosi transformed Europe's economy from a barter system to one based on currency.

Modern exploration has found significant lithium deposits in Potosi, potentially providing new economic opportunities.

Lithium is a crucial material for modern technologies like electric vehicle batteries and electronics.

The Bolivian government seeks to manage lithium extraction to benefit its own people, rather than repeating past colonial exploitations.

The discovery of wealth in Potosi spurred other European countries, like England and France, to search for their own sources of valuable resources.

While still containing silver, Potosi's vast silver reserves had largely been extracted by the time Bolivia gained independence.

A significant banking crisis in 1907 that caused a large number of banks to fail in New York, leading to a need for government intervention.

The U.S. government provided money to banks, but lacked a structure to distribute the funds effectively to prevent collapse.

JP Morgan was entrusted with the task of resolving the New York banking system crisis by fixing failing banks using government funds.

A central banking system created in the United States by negotiation concluding in 1913, aiming to stabilize the economy and prevent future crises.

The Federal Reserve has the responsibility to maximize employment, stabilize the economy, and regulate banks, in the United States.

One of the roles of the Federal Reserve, aiming to increase jobs through suitable economic policies and regulations.

The Federal Reserve's role in maintaining financial stability and preventing economic crises, a component of its three core responsibilities.

The Federal Reserve has a role in controlling and monitoring banks to reduce risk and prevent future financial crises (indirectly related to 1907 crisis)

Regulating banks, supervising banks, approving financial mergers, stabilizing the financial system.

The Federal Reserve has been involved in political debates, and currently faces political pressure regarding its operations.

The Bank of Canada was established in 1935, following a 1933 royal commission that recommended its creation.

Canadians initially did not see a need for a central bank until the Great Depression and the need to alleviate deflation.

The Great Depression spurred the creation of the Bank of Canada. The need was to inflate the Canadian economy to counteract deflationary effects.

The gold standard hindered the ability to inflate the economy effectively during the Great Depression.

A fiat currency system allows governments to manipulate the money supply to combat economic crises, like the Great Depression.

The Bank of Canada is a government institution in Canada that controls the money supply and attempts to moderate inflation. It is designed to be free from political influence.

An institution that is independent of political influence (the Bank of Canada).

Central banks are usually kept separate from politics to maintain economic stability.

Commercial banks take deposits, pool them, and provide loans to individuals and businesses, which they otherwise might not have access to.

Commercial banks collect and group different depositors money to distribute to borrowers (individuals and businesses).

Banks used to print their own money, backing it up with gold or other valuable assets.

A stable banking system is vital for a capitalist economy to work effectively. They provide a crucial link between savers and borrowers, facilitating the flow of capital.

The government appoints the governor of the Bank of Canada, but typically allows the central bank to manage the economy without political interference. An exception existed in the 1960s in Canada.

A significant event where a Canadian bank failed due to poor investments, shocking the banking system and highlighting its vulnerabilities. This event forced the government to take a more active role in regulating the banking system.

While the Great Depression significantly impacted Canada's banking system, Canadian banks were never in danger of closing, unlike their American counterparts. This resilience is attributed to a more conservative banking system in Canada.

A commission that reviewed the Canadian banking system, highlighting its restrictive nature and recommending a more open and competitive environment for banks to operate in.

A landmark legislation that implemented the Porter Commission's recommendations, significantly opening up the Canadian banking system and allowing banks greater access to the mortgage market.

After the 1967 Bank Act, Canadian banks were given greater access to the mortgage market, allowing them to compete with other financial institutions, like trust companies and brokers.

A system introduced in 1967 to protect individuals from losing their bank deposits if a bank fails. This provided a crucial safety net for bank customers.

The 1923 crisis highlighted the need for greater government oversight and regulation of the banking system. This led to the creation of a more conservative and controlled banking environment in Canada.

The 1967 Bank Act modernized the Canadian banking system by introducing significant changes, including greater access to the mortgage market, increased competition, and the introduction of deposit insurance. These changes allowed banks to grow and offer a wider range of services.