lec 36-37 money and the financial systems.ppt

8/20/2019 LEC 36-37 MONEY AND THE FINANCIAL SYSTEMS.ppt

1/19

1

MONEY AND THE

FINANCIALSYSTEMS


2/19

2

DESIRED LEARNING

OBJECTIVESThe students must be able t!m"#ehend$%

•The Rle & the &'nan!'al s(stem 'nmde#n e!nm'es)

• The natu#e & &'nan!'al assets)

•

H* the !n!e"t & mne( *as e+l+ed,• -hat a#e d'&&e#ent !m"nents & mne(su""l( and demand,

• -hat #le 's "la(ed b( ban.s 'n su""l( &mne( 'n the e!nm(,


3/19

3

THE MODERN FINANCIAL SYSTEM

• It 's the !'#!ulat#( s(stem that l'n.st/ethe# /ds0 se#+'!es and &'nan!e 'ndmest'! and 'nte#nat'nal ma#.ets)

• It 's th#u/h th's s(stem that "e"le and&'#ms b##* and lend)

• Sal'ent "a#ts & th's s(stem a#e$%

– Mne( ma#.et – Ma#.ets &# &'1ed 'nte#est assets l'.e bnds

and m#t/a/es)

– St!. ma#.ets

– F#e'/n e1!han/e ma#.ets)


4/19

4

THE MODERN FINANCIAL SYSTEM

• B##*'n/ and lend'n/ ta.es "la!e 'n &'nan!'al

ma#.ets and th#u/h &'nan!'al 'nte#med'a#'es)

• F'nan!'al ma#.ets a#e 2ust l'.e the# ma#.ets0

e1!e"t that the'# /ds a#e st!.s 3 bnds)E1$ st!.4bnd4&#e'/n e1!han/e ma#.ets)

• F'nan!'al 'nte#med'a#'es "#+'de &'nan!'al

se#+'!es and "#du!ts) E1$ Ban.s0 'nsu#an!e

!m"an'es0 "ens'n &unds)


5/19

5

F5NCTIONS OF FINANCIAL SYSTEM

• T#ans&e#s Resu#!es a!#ss T'me0 Se!t#s andRe/'ns$% – It all*s 'n+estments t be d'+e#ted t the'# mst

"#du!t'+e uses)

– Due t !hea" and ha#d*#.'n/ Ch'nese labu# and&a+u#able "l'!'es & the /+e#nment0 Ch'na hasbe!me N 6 "la!e &# &#e'/n 'n+estments)

• Mana/es R's. 'n the E!nm($%

– R's. mana/ement 's l'.e #esu#!e t#ans&e#$ 't m+es#'s.s m thse "e"le # se!t#s that mst need t#edu!e the'# #'s.)

– F'#e 'nsu#an!e & ne huse 's a h'/h #'s. +entu#e$Insu#an!e !m"an'es s"#ead th's #'s. +e# all su!h

"l'!( hlde#s)


6/19

6


• 7ls and Subd'+'des Funds$% – 7l'n/ Funds$ Hu/e "#2e!ts need b'll'ns #u"ees

'n+estment 'n "lant0 land0 'nast#u!tu#e)

– In+estment !#"#at'ns !an d th's tas. b( sell'n/

the sha#es & st!. t man( "e"le and "l the'#&unds t unde#ta.e la#/e and #'s.( 'n+estments)

– E1$ Mansha /#u"0 !#es!ent /#u"0 De*an%Salman

– Subd'+'d'n/ Funds$ Yu *ant t 'n+est Rs 680888 'n ad'+e#s'&'ed "#t&l' & 688 !m"an'es)

– In+estment 'n su!h "#t&l' #e9u'#es Rs 68 m'll)

– A mutual &und ha+'n/ 6888 su!h 'n+est#s0 subd'+'desth's 'n+estment amn/ them and !ha#/es 2ust Rs :84%"e# annum m ea!h 'n+est#)

– E1$ IC70 NIT0 Atlas Fund0 Hab'b Muda#aba0 et!)


7/19

7


• Fun!t'ns as a Clea#'n/huse$%

– The &'nan!'al s(stem &a!'l'tates t#ansa!t'ns

bet*een "a(e#s ;"u#!hase#s< and "a(ee

;selle#s


8/19

8

THE S7ECIAL CASE OF MONEY

• -h( d *e need mne(,• Des mne( "ssess an( 'nt#'ns'! +alue,• Mne( 's useless unt'l *e /et #'d & 't t a!9u'#e

the# use&ul /ds and se#+'!es)

• Yet0 mne( 's +e#( 'm"#tant m ma!#))• It 's ne & the t* tls & /+e#nment t

stab'l'se the e!nm(0 the# be'n/ &'s!al)• -hen the &'nan!'al s(stem *#.s *ell0 ut"ut

/#*s smthl( *'th stable "#'!es)• But0 *hen 't des nt *#. *ell0 't !an lead t

'n&lat'n # de"#ess'n)• -#ld=s ma2# e!nm'! t#aumas & >8th !entu#(

bea# test'mn( t 'll%mana/ed mneta#( s(stems)


9/19

9

EVOL5TION OF MONEY

• -hat 's mne(,

• ?An(th'n/ that se#+es as !mmnl( a!!e"tedmed'um & e1!han/e)@

6) Ba#te#$%• ?E1!han/e & /ds &# the# /ds)@

>) Cmmd't( Mne($%

• Cattle0 l'+e 'l0 bee# # *'ne0 !""e#0 '#n0 /ld0

s'l+e#0 d'amnds0 !'/a#ettes)• B( 6th !entu#(0 !mmd't( mne( *as almst

e1!lus'+el( l'm'ted t metals l'.e s'l+e# and/ld)


10/19

10

EVOL5TION OF MONEY

) Mde#n Mne($%

• -'th the "assa/e & t'me0 !mmd't(mne( /a+e *a( &# "a"e# mne( due t

the &ll*'n/ ad+anta/es$% – It 's !n+en'ent t !a##( and #e!/n'se)

– It !an be sa+ed m !unte#&e't'n/ b( !a#e&ulen/#a+'n/0 embss'n/0 et!)

– It 's eas'e# t .ee" 'ts su""l( s!a#!e &##etent'n & 'ts +alue)

• 7a"e# mne( *as /#aduall( +e#ta.en b(

ban. mne( the !he!.'n/ a!!unts)


11/19

11

COM7ONENTS OF MONEY S577LY

• Cu##en!($% ?C'ns and "a"e# mne(held uts'de the ban.'n/ s(stem)@

– In the "ast0 the "a"e# mne( *as ba!.ed b(

/ld # s'l+e# N su!h #e9u'#ement n*) – All !'ns and "a"e# mne( a#e &'at mne()

The te#m s'/n'&'es smeth'n/ de!la#ed t be

mne( e+en '& 't has n 'nt#'ns'! +alue)

– 7a"e# mne( # !'ns a#e le/al tende#0

*h'!h u/ht t be a!!e"ted &# all debts

"ubl'! and "#'+ate)


12/19

12

COM7ONENTS OF MONEY S577LY

• Demand De"s'ts and Othe# Che!.ableDe"s'ts$% ?Funds0 de"s'ted 'n ban.s

and the# &'nan!'al 'nst'tut'ns a/a'nst

*h'!h ne !an *#'te !he!.s # *'thd#a*mne( m)@

– E1$ I& (u ha+e Rs 60888 'n (u# ban.

a!!unt0 't 's #e/a#ded as mne( and (u!an "a( &# "u#!hases m th's amunt)

– C#ed't !a#d0 n the the# hand0 's nt mne(

thu/h (u !an ma.e "u#!hases m 't)

-h(,


13/19

13

THE DEMAND FOR MONEY

Be&#e d's!uss'n/ the demand &# mne(0let=s nte 'ts &un!t'ns$%

• Med'um & E1!han/e$% -'thut th's tl0

*e=d be al*a(s l.'n/ &# smene tba#te# *'th)

• 5n't & A!!unt$% It hel"s 'n measu#'n/

the +alue & th'n/s be'n/ e1!han/ed)• St#e & Value$% Cm"a#ed t #'s.(

assets l'.e st!.s and #eal estate0 mne(

's #elat'+el( ee & #'s.)


14/19

14

THE DEMAND FOR MONEY

T* Su#!es & Demand &# Mne($%

• T#ansa!t'ns Demand &# Mne($% As

mne( 's used t bu( /ds and

se#+'!es0 *e need 't t ma.e "a(ments) – E1$ Cash at hand # mne( 'n ban. a!!unt)

• Asset Demand$% Mne( 'tsel& !an be

used as a st#e & +alue) F# e)/) 5S!u##en!( 's *'del( held as a sa&e asset 'n

!unt#'es *he#e h("e#'n&lat'n !!u#s0

# *he#e &'nan!'al s(stem 's un#el'able)


15/19

15

BANS AND THE S577LY OF MONEY

• -h'le mne( ma.es a t'n( "a#t ;6< & all &'nan!'alassets0 the 'nte#a!t'n bet*een the !ent#al ban. and!mme#!'al ban.s "la(s a +'tal #le 'n sett'n/ 'nte#est#ates and +e#all ma!#e!nm'! baha+'u#)

•A ban. 's bas'!all( a bus'ness0 *h'!h "#+'desse#+'!es &# 'ts !ustme#s and 'n #etu#n #e!e'+es"a(ment m them)

• See Table >% &# !nsl'dated balan!e sheet & all5S !mme#!'al ban.s)

• A balan!e sheet 's a statement & a &'#m=s &'nan!'al"s't'n at a "'nt 'n t'me)

• Assets$ Items that the &'#m *ns)

• L'ab'l't'es$ Items that the &'#m *es)

• Net -#th$ the d'&&e#en!e bet*een assets 3 l'ab'l't'es)


16/19

16


17/19

17


18/19

18

BANS AND THE S577LY OF MONEY

• A un'9ue &eatu#e & a ban. balan!e sheet's an asset !alled #ese#+es)

• It #e&e#s t a s"e!'al !ate/#( & ban.

assets that a#e #e/ulated b( the !ent#alban.)

• Rese#+es e9ual !ash held b( the ban.

de"s'ts *'th the !ent#al ban.)• Ea#l'e#0 #ese#+es *e#e .e"t t "a(

!ustme#s0 but tda( the( se#+e

"#'ma#'l( t meet le/al #e9u'#ement)


19/19

19

A MODERN BANING SYSTEM

• Ban.s a#e #e9u'#ed t hld at least 68& the'# !he!.'n/ de"s'ts as #ese#+es 'n

the &#m & !ash and de"s'ts *'th the

!ent#al ban.)• The !ent#al ban. !an ad2ust bth

'nte#est #ate and ban. #ate)

• In add't'n t "#+'d'n/ the se#+'!e &!he!.'n/ de"s'ts0 ban.s "#+'de man(

the# se#+'!es0 *h'!h ma.es the

ban.'n/ bus'ness !m"l'!ated)

lec 36-37 money and the financial systems.ppt

Documents