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Horizontalism
Horizontalism is an approach to money creation theory pioneered by Basil Moore which states that private bank reserves are not managed by central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...s. Instead reserves will be provided on demand at the bank rate set by the central bank. This inverts the mainstream textbook money multiplier relationship between deposits and loans since loans are said to cause deposits which in turn cause reserves. Horizontalism influenced monetary circuit theorists to develop the endogenous money approach that was already nascent within post-Keynesian academic thought. It states that an increasing demand for loans by bank customers leads to banks making more loans and creating more deposits, without regard to the size of the bank's availabl ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Endogenous Money
Endogenous money is an economy’s supply of money that is determined endogenously—that is, as a result of the interactions of other economic variables, rather than exogenously (autonomously) by an external authority such as a central bank. The theoretical basis of this position is that money comes into existence through the requirements of the real economy and that the banking system reserves expand or contract as needed to accommodate loan demand at prevailing interest rates. Central banks implement policy primarily through controlling short-term interest rates. The money supply then adapts to the changes in demand for reserves and credit caused by the interest rate change. The supply curve shifts to the right when financial intermediaries issue new substitutes for money, reacting to profit opportunities during the cycle. History Theories of endogenous money date to the 19th century, with the work of Knut Wicksell, and later Joseph Schumpeter. Early versions of this theor ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Money Creation
Money creation, or money issuance, is the process by which the money supply of a country, or an economic or monetary region,Such as the Eurozone or ECCAS is increased. In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is a liability, typically called reserve deposits, and is only available for use by central bank account holders, which are generally large commercial banks and foreign central banks. Central banks can increase the quantity of reserve deposits directly, by making loans to account holders, purchasing assets from account holders, or by recording an asset, such as a deferred asset, and directly increasing liabilities. However, the majority of the money supply used by the public for conducting transactions is created by the commercial banking system in the form of commercial bank deposits. Bank loans issued by commercial banks expand the quantity of bank deposits. Money creation occurs when the am ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Basil Moore (economist)
Basil John Moore (6 June 1933 - 8 March 2018) was a Canadian post-Keynesian economist, best known for developing and promoting endogenous money theory, particularly the proposition that the money supply curve is ''horizontal,'' rather than upward sloping, a proposition known as horizontalism. He was the most vocal proponent of this theory, and is considered a central figure in post Keynesian economics Moore studied economics at the University of Toronto and at Johns Hopkins University. In 1958 he started a distinguished academic career at Wesleyan University in Middletown, Connecticut and became professor emeritus at the University. He left in 2003 to move to South Africa where he joined the University of Stellenbosch with which he had long maintained an association and, "where he was Professor Extraordinary of Economics." Theory Moore emphasizes the mechanics of credit creation, particularly lines of credit extended by banks to large corporations on the money supply. He argu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bank Reserves
Bank reserves are a commercial bank's cash holdings physically held by the bank, and deposits held in the bank's account with the central bank. In most countries, the Central bank may set minimum reserve requirements that mandate commercial banks under their purview to hold cash or deposits at the central bank equivalent to at least a prescribed percentage of their liabilities, such as customer deposits. Such sums are usually termed required reserves, and any funds above the required amount are called excess reserves. These reserves are prescribed to ensure that, in the normal events, there is sufficient liquidity in the banking system to provide funds to bank customers wishing to withdraw cash. Even when there are no reserve requirements, banks often as a matter of prudent management hold reserves in case of unexpected events, such as unusually large net withdrawals by customers (such as before Christmas) or bank runs. Traditionally, central banks do not pay interest on reserve ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Central Bank
A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base. Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs, and, in some cases, to enforce policies on financial consumer protection, and against bank fraud, money laundering, or terrorism financing. Central banks play a crucial role in macroeconomic forecasting, which is essential for guiding monetary policy decisions, especially during times of economic turbulence. Central banks in most developed nations are usually set up to be institutionally independent from political interference, even though governments typically have governance rights over them, legislative bodies exercise scrutiny, and central banks frequently do show resp ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bank Rate
Bank rate, also known as discount rate in American English, and (familiarly) the base rate in British English, is the rate of interest which a central bank charges on its loans and advances to a commercial bank. The bank rate is known by a number of different terms depending on the country, and has changed over time in some countries as the mechanisms used to manage the rate have changed. Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country. The borrowing is commonly done via repos: the repo rate is the rate at which the central bank lends short-term money to the banks against securities. It is more applicable when there is a liquidity crunch in the market. In contrast, the reverse repo rate is the rate at which banks can park surplus funds with the reserve bank, which is mostly done when there is surplus liquidity. Determining the rate The interest rate that is charged by a country's central or fe ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Money Multiplier
In monetary economics, the money multiplier is the ratio of the money supply to the monetary base (i.e. central bank money). In some simplified expositions, the monetary multiplier is presented as simply the reciprocal of the reserve ratio, if any, required by the central bank. More generally, the multiplier will depend on the preferences of households, the legal regulation and the business policies of commercial banks - factors which the central bank can influence, but not control completely. Because the money multiplier theory offers a potential explanation of the ways in which the central bank can control the total money supply, it is relevant when considering monetary policy strategies that target the money supply. Historically, some central banks have tried to conduct monetary policy by targeting the money supply and its growth rate, particularly in the 1970s and 1980s. The results were not considered satisfactory, however, and starting in the early 1990s, most central b ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Monetary Circuit Theory
Monetary circuit theory is a heterodox theory of monetary economics, particularly money creation, often associated with the post-Keynesian school. It holds that money is created endogenously by the banking sector, rather than exogenously by central bank lending; it is a theory of endogenous money. It is also called circuitism and the circulation approach. Contrast with mainstream theory The key distinction from mainstream economic theories of money creation is that circuitism holds that money is created endogenously by the banking sector, rather than exogenously by the government through central bank lending: that is, the economy creates money itself (endogenously), rather than money being provided by some outside agent (exogenously). These theoretical differences lead to a number of different consequences and policy prescriptions; circuitism rejects, among other things, the money multiplier based on reserve requirements, arguing that money is created by banks lending, wh ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Post-Keynesian Economics
Post-Keynesian economics is a Schools of economic thought, school of economic thought with its origins in ''The General Theory of Employment, Interest and Money, The General Theory'' of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Weintraub (economist born 1914), Sidney Weintraub, Paul Davidson (economist), Paul Davidson, Piero Sraffa, Jan Kregel and Marc Lavoie. Historian Robert Skidelsky, Baron Skidelsky, Robert Skidelsky argues that the post-Keynesian school has remained closest to the spirit of Keynes' original work. It is a heterodox approach to economics based on a non-equilibrium economics, non-equilibrium approach. Introduction The term "post-Keynesian" was first used to refer to a distinct school of economic thought by Alfred Eichner, Eichner and Kregel (1975) and by the establishment of the ''Journal of Post Keynesian Economics'' in 1978. Prior to 1975, and occasionally in more ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Private Bank
Private banks are banks owned by either the individual or a general partner(s) with limited partner(s). Private banks are not incorporated. In any such case, creditors can look to both the "entirety of the bank's assets" as well as the entirety of the sole-proprietor's/general-partners' assets. Private banks have a long tradition in Switzerland, dating back to at least the Revocation of the Edict of Nantes (1685). Private banks also have a long tradition in the UK where C. Hoare & Co. has been in business since 1672. Notable private banks This list contains two types of banks: * Unincorporated banks owned by either an individual or a general partner(s) with limited partner(s). * Incorporated banks specialized in wealth management for high-net-worth individuals. China * Bank of Communications, founded in 1908 * China Merchants Bank France * Compagnie Financière Edmond de Rothschild, Paris, founded in 1953; a member of Edmond de Rothschild Group * Société Géné ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Leverage Ratio
In finance, leverage, also known as gearing, is any technique involving borrowing funds to buy an investment. Financial leverage is named after a lever in physics, which amplifies a small input force into a greater output force. Financial leverage uses borrowed money to augment the available capital, thus increasing the funds available for (perhaps risky) investment. If successful this may generate large amounts of profit. However, if unsuccessful, there is a risk of not being able to pay back the borrowed money. Normally, a lender will set a limit on how much risk it is prepared to take, and will set a limit on how much leverage it will permit. It would often require the acquired asset to be provided as collateral security for the loan. Leverage can arise in a number of situations. Securities like options and futures are effectively leveraged bets between parties where the principal is implicitly borrowed and lent at interest rates of very short treasury bills.Mock, E. J., R. E ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
