Students will explain the functions that money serves; students will identify
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Students will explain the functions that money serves; students will identify the sources of money’s value;. Government and the Economy. Commodity, representative and fiat money.

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Government and the Economy

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Government and the economy

Students will explain the functions that money serves; students will identify

the sources of money’s value;

Government and the Economy

Commodity, representative and fiat money

Commodity: an item that has a value of its own—precious metals (gold and silver) and gems; tobacco in the early VA colony

Jamestown, Virginia

100 Englishwomen: bought for 120 lbs of tobacco

=


Government and the economy

Students will explain the functions that money serves; students will identify

the sources of money’s value;

Government and the Economy

Commodity, representative and fiat money

Representative: paper money; specie (gold or silver)

Fiat: a government fiat or decree says that it has value


Government and the economy

Students will explain the functions that money serves; students will identify

the sources of money’s value;

Government and the Economy

In this film I played a secret service agent focused on anti-counterfeit operations. So, what steps has the U. S. government taken to combat the rise of illegally created currency?


Government and the economy

Students will explain the functions that money serves; students will identify

the sources of money’s value;

Government and the Economy

In 1996 the Treasury Department introduced a new $100 bill—thefirst major redesign since 1929. The design incorporated several security features that make it difficult to forge the new bill. These features include an almost-invisible watermark, or design in the paper, of Benjamin Franklin whose enlarged portrait also appears on the bill; a multicolored shade of ink for the numeral in the lower front right-hand corner; a synthetic security thread embedded in the paper; and microprinting


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Government and the Economy

Pilgrims, I often played historical characters, like Davy Crocket inThe Alamo. So, nippers, pay attention now as we discuss the history of U. S. banking. First off, let’s do a little brainstorming. In groups of 2-3, list what you remember about

U. S. banking history.


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Government and the Economy

Prior to the Civil War

Hamilton’s Economic Plan

1790: U.S. huge national debt.

  • Government take responsibility for

  • for existing public debt

  • Federal government assume states’

  • debts

  • Create a large and permanent national

  • debt

  • Create a national bank

  • Excise taxes on distillers & tariffs


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

The First United States Government

Hamilton’s Economic Plan

Jefferson opposed paying off states’ debts

Only pay off national debt; many southern

states had already

paid off state debts.

Would accept national

bank if capital moved

to new city on banks

of Potomac River.


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

The First United States Government

Hamilton’s Economic Plan

For: influential segments of population,

speculators plus manufacturers and

merchants

Anti: small farmers (majority)

Disproportionate tax burden

Property taxes to states

Bore brunt of excise taxes


Government and the economy

Jacksonian Democracy

Second Bank of the United States

Most powerful financial

institution

Only place the federal

government could deposit

funds

Federal government owned 20% of stock and did tremendous business in general banking. It provided credit to growing enterprises and issued bank notes

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;


Government and the economy

Jacksonian Democracy

Hard Money vs. Soft Money

Soft Money: more currency in circulation

Issuing banknotes unsupported by gold or

silver was the best way to circulate more

currency

Objected to Bank of the United States

because it restrained state banks from

issuing notes freely

Wanted rapid expansion

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Jacksonian Democracy

Hard Money vs. Soft Money

Hard Money: Gold & silver only currency basis

Condemned all banks that issued bank notes

Conservative approach to expansion

I was a hard money advocate

because a business I owned failed as a result of the Panic of 1797. I was therefore suspicious of banks and paper currency.


Government and the economy

Jacksonian Democracy

Nicholas Biddle

President of the Bank of the

United States

Put bank on a sound and prosperous basis

Granted financial favors to influential men (Webster and

Clay)

1832: asked Congress to renew bank’s charter 4 years

early (campaign issue)

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Government and the Economy

Civil War to World War I

Patchwork banking system

Civil War—Congress issued greenbacks as currency not backed by specie; rather it was fiat money backed only by the federal government’s promise to repay the note’s face value at some future date

National Banking Acts of 1863 and 1864—gave the federal government the power to charter banks and require banks to hold gold and silver reserves


Government and the economy

Government and the Economy

Bimetallism: most of its existence, U. S. had

recognized both gold and silver as backing

for currency

Crime of 1873:

  • 1870s: 16 oz of silver = 1 oz of gold

  • Silver used more for jewelry than for coins;

  • Mints stopped coining silver

  • 1873: Congress—officially discontinued silver

  • coins

  • Value of silver fell below 16:1; many felt a

  • conspiracy of big bankers; demanded a

  • return, at once, to free silver and unlimited

  • coinage of silver at 16:1

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Government and the Economy

1896 Democratic National Convention

Western & Southern delegates

determined to seize control

Wanted a pro-silver candidate

William Jennings Bryan

Bryan, the Great Commoner,

The Cross of Gold Speech


Government and the economy

Students will discuss key events in U. S. banking history, identifying the most common types of U. S. financial institutions;

Government and the Economy

World War I to present

Federal Reserve Act of 1913

Several acts during the New Deal—bank holiday; Banking Act of 1933—Fed’s member banks could not sell stocks and bonds and established the FDIC

The Gold Reserve Act of 1934—eliminated the gold standard in the US—done to regulate the amount of money in the economy, control credit, restore confidence in the economy, and stabilize exchange rates


Government and the economy

Students will identify and discuss the results of banking deregulation

Government and the Economy

In this film I deregulated some Japanese naval vessels during World War II. How about you tell the Colonel about bank deregulation.


Government and the economy

Students will identify and discuss the results of banking deregulation

Government and the Economy

Deregulation is the reduction of government restrictions resulted in more competition and the rise of regional banking

Banks can offer loan rates comparable to Savings and Loans and credit unions

Banks can also merge with other banks to build branch offices in other states


Government and the economy

Hmmm. That check on the wall makes me think of banking, which makes me further think about the topic of this chapter, the Federal Reserve.

Government and the Economy

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Back in 1907, people dressed liked this, and unlike Danny, no one had weird haircuts. So which one of you little nippers can tell me about the causes of the Panic of 1907.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Duke, I was born in 1907 and I’m a real man like you. So, I’ll answer. The nation’s monetary system at the time had no mechanism for expanding the amount of money in circulation and, second, the system of pyramided reserves in which smaller banks deposit some of their reserves into larger banks and larger banks deposit some of their reserves into the largest banks.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

That’s pretty good, pilgrim. Now which one of you little nippers can tell me the role of the Federal Reserve System?

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Students will explain the characteristics and purposes of the Federal Reserve System

Government and the Economy

We can, Mr. Wayne. First the Fed supervises member banks. Second, it holds cash reserves, which represent funds available for short-term borrowing by commercial banks or by the government. Third, the Fed moves money into or out of circulation in order to stabilize the national monetary and banking systems.


Government and the economy

Government and the Economy

Good job, Emanual. Say those are two pretty handsome fillies you are with. Let’s go ahead and discuss the way the Federal Reserve is organized.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

And one of the most important aspects of the Federal Reserve system is its ability to remain free of political pressure. The long, staggered terms of the members of the Board of Governors prevent any one U. S. president from “stacking” the board. The Fed also funds itself and receives no budget appropriations from Congress.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

October, 2022

Your check bounced! It messed up our account big time. You’re gonna get it for that. Maybe that will teach ya how the Fed oversees the flow of money by clearing checks.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

After learnin’ that lesson, maybe she’ll be more careful when she writes checks. But, pilgrims, the Fed also makes loans to commercial banks. What kind of loans are they?

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Mr. Wayne, sir, I know!!! Many are short term loans to replenish their reserves, or supplies of cash. Federal Reserve banks loan reserves, usually for periods of one day to several weeks. Most are sought for seasonal factors, natural disasters, and financial emergencies. I hope you like my answer, because I think you were mega-HOT, Mr. Wayne!

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Don’t be such a kiss-up, Janki. After all, his real name was Marion Morrison! And you forgot to say that the Fed also serves as a lender of last resort by making emergency loans to commercial banks in times of emergency.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Watch your mouth, little lady. Remember, never mess with a paratrooper. All right, back to business. How does the Fed work with the U. S. Treasury?

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Duke, the Fed serves as the government’s bank.

It also serves as the depository for federal revenues and holds a Treasury checking account on which the Treasury writes checks to cover tax refunds, Social Security payments and all other government payments, like my monthly pension.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Thanks, Colonel Pete. You were the same rank that I was in this picture, The Longest Day. Any way, one of you little nippers needs to tell me how the Fed regulates the money supply.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Mr. Wayne, you are my kind of guy—my favorite actor and a GREAT AMERICAN! The answer is: It regulates the amount of money in circulation.

New currency is put into circulation for two major reasons:

a. To replace old and worn-out notes, which eventually are destroyed; and

b. To increase the amount of money in circulation by expanding the pool of cash that the Federal Reserve banks can loan.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Moreover, on behalf of the entire system, the Federal Reserve Bank of New York buys and sells U. S. government securities on the open market. Trading in securities allows the Fed both to increase or decrease the money supply and to provide the government with the cash it needs to finance public goods and services.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Pilgrim, you’re pretty squared away. Great job—you can be in MY unit any day. All right, on the next slide I’m gonna show ya the 3 different measurements of the U. S. money supply.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

M1—all currency in circulation, the value of all travelers’ checks, all checking-account deposits, and similar accounts in financial institutions;

M2—M1 plus money-market accounts, money-market mutual fund shares, and other easily accessible savings deposits;

M3—M2 plus all large time deposits, repurchase agreements and Eurodollars

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Students will explain the characteristics and purposes of the Federal Reserve System

Government and the Economy

Before we charge on into your econ final, I’m gonna show ya the difference between easy-money policy and tight-money policy. Learnin’ that is almost as tough as chargin’ the Sands of Iwo Jima.


Government and the economy

Government and the Economy

Easy-money policy is designed to expand the money supply, increase aggregate demand, create jobs, and thus reduce unemployment and promote economic growth. Usually adopted during a recession.

By charging banks a lower interest rate to borrow money, the Fed makes more money available to those banks; banks, in turn, lower interest rates they charge customers.

Increased borrowing and spending stimulate economic growth as businesses make more products and hire more workers.

Can lead to inflation

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Hayley is grabbing me too tightly. Hey! I guess that’s a nice segue into our discussion of tight-money. What is tight money?

Government and the Economy

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

As a person in a tight spot, I’ll do that right now. A tight-money policy slows business activity and helps stabilize prices. It is characterized by higher interest rates and a contraction of the money supply, both of which are designed to reduce aggregate demand. It can lead to deflation.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

Not bad, young lady. I hope ya got outa that mess. Any way, let’s finish this so we can get to the officers’ club. I know you youngsters are tired, so I’ll finish this off on the next slide by showin’ ya monetary policy tools. Pay attention or I’ll have ya on KP tomorrow.

Students will explain the characteristics and purposes of the Federal Reserve System


Government and the economy

Government and the Economy

  • Open-Market Securities—main tool of the Fed—buying and selling of government securities;

  • Discount rate—interest rate that the Fed charges member banks for the use of its reserves—adjusted to increase or decrease borrowing

  • Prime rate: the interest rate the commercial banks charge on loans to their most reliable business customers;

  • Reserve requirement—the money that must be held by banks either in their own vaults or in their accounts at the district Federal Reserve bank.

Students will explain the characteristics and purposes of the Federal Reserve System


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