For any country in contemporary times, there is only one central bank . The central bank of the UK is Bank of England , the central bank of the US is Federal Reserve , and the central bank of China is People's Bank of China ,... Banknotes are exclusively printed and issued by the central bank.
After the Second World War , in order to restore the economy and stabilize the financial order, Western countries strengthened control over central banks while also strengthening their power and responsibilities. Most of the central banks established during this period rely on the power of the government and learn from the past experience of other countries, so that they have comprehensive and direct characteristics of "bank of banks".
Until around 1980, central banks were established in some countries such as Asia, Africa and Latin America, which marked the popularization of the central bank system around the world.
All central banks have four major functions:
1) issuing banks. The central bank is the only currency issuing institution in a country .
2) Bank of the country. The central bank represents the government, which generally means that the central bank of most countries usually also acts on behalf of the government's treasury funds, acts on behalf of the government's bond trading, acts on behalf of the government's foreign exchange and gold reserves, formulates and supervises relevant financial management regulations, represents the government to participate in international financial organization , attends international conferences, engages in international financial activities, and signs international financial agreements on behalf of the government.
3) Bank of the bank. Concentrate deposit reserves of all commercial banks, act as lenders of all commercial banks, organize bank clearing across the country, etc.
4) regulates the economy and provides scientific advice for government decision-making. When the economy overheated, the central bank will raise interest rates, increase the deposit reserve ratio, , , issue treasury bonds (or one of three activities), tighten the economy, and reduce market liquidity - in fact, reduce the supply of banknotes in circulation;
On the contrary, when the economy is in recession, the central bank will lower interest rates, lower the reserve ratio, acquire treasury bonds (or one of three activities), and increase market liquidity - in fact, increase the amount of banknotes in circulation.
To a certain extent, the financial systems of countries around the world are now centered on the central bank system. When countries around the world have established their own central banks, the task of other banks and all financial institutions is to closely unite around the central bank as the core and strive to achieve permanent growth of the country's economy.
The central bank issues a country's currency. Whether the currency value is stable or not is an important sign of whether a country's economy is healthy. If everyone recognizes your currency, your currency will appreciate, which means that the country's economy is good.
If everyone doesn’t believe you and sell your currency, your currency will depreciate. Therefore, currency marks a country's economic strength and is a symbol of confidence. People are willing to want this currency because of its sufficient value and stability.
In reality, deposit money bank generally withdraws more cash from the central bank than the cash deposited, which is an increase in the issuance of cash, which is a habitually called cash issuance;
deposit money bank generally deposits more cash into the central bank than the cash withdrawn, which is a decrease in the issuance of cash, which is a habitually called cash withdrawal.
Overall, with the growth of the economy, the issuance of cash increases. When additional cash issuance is an inevitable trend, it means that deposit money banks are constantly withdrawing cash from reserved accounts.
Assuming that the amount of the reserved deposit is given, the following consequences will inevitably occur: the reserved deposit will decrease in equal amounts with the withdrawal of cash; accordingly, the amount of deposit money created will also be reduced accordingly due to the decrease in the reserved deposit.
is obvious, it is not like this in reality. In normal economic activities, the basis of cash issuance is economic growth, so economic growth must also require sufficient growth of deposit currency. To serve the expanding circulation, the central bank will continue to replenish the amount of deposits prepared. Since the central bank has completely monopolized the issuance of paper money, any "money" in our hands is from the printing machine of the central bank.
Since no country now implements the so-called gold standard , silver standard or any other commodity standard, how to prevent the central bank from issuing paper money indiscriminately?
currency issuance system for different countries has different contents depending on national conditions. The most important thing is to set the principle of issuance reserves differences.
issuance preparations are generally divided into two types: one is cash reserves, including gold and silver bars with full monetary value, gold and silver coins , and foreign exchange balances that can be directly used for currency clearing abroad;
The other is guaranteed preparations, mostly using government bonds, fiscal short-term treasury bills, short-term commercial paper and other assets with high monetization capabilities as issuance guarantees.
Therefore, everyone should understand that the current banknotes, whether they are US dollars, RMB, euros, pounds, yen or Swiss francs, , are not certificates of wealth, but certificates of debt.
In fact, any central bank's balance sheet will list all the amount of banknotes issued in the "Liability" column, and list all of them such as foreign exchange reserves , gold and printing presses in the "Assets" column.
Central Bank adjusts the deposit reserve ratio, which will have a multi-faceted important impact on national finance.
1) impact on banks. The increase in the deposit reserve ratio, the reduction of bank credit funds and the reduction of loan profits will directly have a certain impact on banks whose main business is deposit-loan interest rate spread. The impact of
2) on the enterprise. As the deposit reserve ratio is raised, banks will choose loan recipients more carefully, and the financing environment for enterprises is tight.
3) impact on the stock market. Every time the deposit reserve is adjusted, it will have a significant impact on the stock market. Looking at the previous increase in the reserve requirement ratio, the stock market fell more and rose less. The impact of
4) on futures . The increase in the reserve requirement ratio has a greater impact on financial futures and has less impact on commodity futures . The impact of
5) on deposits. The increase in the reserve requirement ratio can directly freeze commercial bank funds, strengthen liquidity management, and curb the excessive growth of total monetary and credit. With the increase in the deposit reserve ratio, banks will increase their efforts to absorb new deposits, but it will not have any direct impact on ordinary people's deposits.
Finance is around us. We organize the obscure financial knowledge in plain language and update it every week. There is only one original intention: to discuss and study with you.
Follow us, become friends, and grow together. This article was first published by "Mr. Jin Yi 2022" and has the same name on the WeChat official account.
Since no country now implements the so-called gold standard , silver standard or any other commodity standard, how to prevent the central bank from issuing paper money indiscriminately?
currency issuance system for different countries has different contents depending on national conditions. The most important thing is to set the principle of issuance reserves differences.
issuance preparations are generally divided into two types: one is cash reserves, including gold and silver bars with full monetary value, gold and silver coins , and foreign exchange balances that can be directly used for currency clearing abroad;
The other is guaranteed preparations, mostly using government bonds, fiscal short-term treasury bills, short-term commercial paper and other assets with high monetization capabilities as issuance guarantees.
Therefore, everyone should understand that the current banknotes, whether they are US dollars, RMB, euros, pounds, yen or Swiss francs, , are not certificates of wealth, but certificates of debt.
In fact, any central bank's balance sheet will list all the amount of banknotes issued in the "Liability" column, and list all of them such as foreign exchange reserves , gold and printing presses in the "Assets" column.
Central Bank adjusts the deposit reserve ratio, which will have a multi-faceted important impact on national finance.
1) impact on banks. The increase in the deposit reserve ratio, the reduction of bank credit funds and the reduction of loan profits will directly have a certain impact on banks whose main business is deposit-loan interest rate spread. The impact of
2) on the enterprise. As the deposit reserve ratio is raised, banks will choose loan recipients more carefully, and the financing environment for enterprises is tight.
3) impact on the stock market. Every time the deposit reserve is adjusted, it will have a significant impact on the stock market. Looking at the previous increase in the reserve requirement ratio, the stock market fell more and rose less. The impact of
4) on futures . The increase in the reserve requirement ratio has a greater impact on financial futures and has less impact on commodity futures . The impact of
5) on deposits. The increase in the reserve requirement ratio can directly freeze commercial bank funds, strengthen liquidity management, and curb the excessive growth of total monetary and credit. With the increase in the deposit reserve ratio, banks will increase their efforts to absorb new deposits, but it will not have any direct impact on ordinary people's deposits.
Finance is around us. We organize the obscure financial knowledge in plain language and update it every week. There is only one original intention: to discuss and study with you.
Follow us, become friends, and grow together. This article was first published by "Mr. Jin Yi 2022" and has the same name on the WeChat official account.
