2012년 3월 31일 토요일

Reading: Frost's Mending Wall

자료 1: On Mending WallRobert Frost (1874-1963)
자료 2: http://www.squidoo.com/mending-wall-lesson-plans
자료 3: Modern & Contemporary American Poetry
....

Mending Wall
Robert Frost

Something there is that doesn't love a wall,
That sends the frozen-ground-swell under it,
And spills the upper boulders in the sun,
And makes gaps even two can pass abreast.
The work of hunters is another thing:
I have come after them and made repair
Where they have left not one stone on a stone,
But they would have the rabbit out of hiding,
To please the yelping dogs. The gaps I mean,
No one has seen them made or heard them made,
But at spring mending-time we find them there.
I let my neighbor know beyond the hill;
And on a day we meet to walk the line
And set the wall between us once again.
We keep the wall between us as we go.
To each the boulders that have fallen to each.
And some are loaves and some so nearly balls
We have to use a spell to make them balance:
'Stay where you are until our backs are turned!'
We wear our fingers rough with handling them.
Oh, just another kind of out-door game,
One on a side. It comes to little more:
There where it is we do not need the wall:
He is all pine and I am apple orchard.
My apple trees will never get across
And eat the cones under his pines, I tell him.
He only says, 'Good fences make good neighbors'.
Spring is the mischief in me, and I wonder
If I could put a notion in his head:
'Why do they make good neighbors? Isn't it
Where there are cows?
But here there are no cows.
Before I built a wall I'd ask to know
What I was walling in or walling out,
And to whom I was like to give offence.
Something there is that doesn't love a wall,
That wants it down.' I could say 'Elves' to him,
But it's not elves exactly, and I'd rather
He said it for himself. I see him there
Bringing a stone grasped firmly by the top
In each hand, like an old-stone savage armed.
He moves in darkness as it seems to me~
Not of woods only and the shade of trees.
He will not go behind his father's saying,
And he likes having thought of it so well
He says again, "Good fences make good neighbors."

....

2012년 3월 30일 금요일

[자료 Updated] currency board (system)


1. http://www.mysmp.com/forex/currency-board.html

2. The Role of Currency Board Regime during Economic Crisis

3. 이 밖에 주요 페이퍼가 하나 더 있었는데, 메모해두지 않았다(제목이 표시돼있지 않은 PDF였고, Role이 제목이나 주요 절 제목으로 들어가있던 글). 찾았다─바로 이 글: What Role for Currency Boards? - Institute for International Economics

4. On Dollarization and Currency Boards: Error and Deception
STEVE H. HANKE (Johns Hopkins University), Policy Reform, 2002, Vol. 5(4), pp. 203–222

5. CURRENCY BOARD OR CENTRAL BANK? Lessons from the Irish Pound's Link with Sterling, 1928-79 Patrick Honohan

6. How To Reduce Inflation: An Independent Central Bank or A Currency Board? The Experience of the Baltic Countries

7. UNDERSTANDING OF THE CURRENCY BOARD SYSTEM IN BOSNIA AND HERZEGOVINA


* * *

slave currency vs. master currency

CF. Currency wars & international trade (MPRA Paper No. 26814, posted 20. November 2010)

[자료] 국제금융위기와 국제통화질서: 금본위제의 교훈을 중심으로


자료: http://www.sejong.org/Pub_st/PUB_ST_DATA/k10_2.PDF
지은이: 김기수 (세종정책연구, 2009년 제5권 2호)

금본위제. 그 이후 브레턴우즈 시스템 등

[메모] IMF 쿼터

자료 1: IMF Fact Sheet, http://www.imf.org/external/np/exr/facts/kor/quotask.pdf (2010년 11월 현재)


(... 전략) 쿼터 출자는 IMF 재원의 대부분을 구성한다. 각 IMF 회원국은 주로 세계 경제에서의 상대적 지위에 따라 쿼터를 배정받는다. 회원국의 쿼터는 IMF에 대한 최대 출자금과 투표권을 결정하고, IMF 금융 사용권과 관계가 있다.

■ 회원국의 쿼터를 결정하는 방법:

한 국가가 IMF 에 가입할 때는 경제 규모와 특성이 대체적으로 비슷한 기존 회원국의 쿼터와
같은 범위의 초기 쿼터가 배정된다. IMF 는 쿼터 계산 공식을 회원국의 상대적 지위를 평가하는 지침으로 사용한다.

현행 쿼터 계산 공식은 GDP(50 퍼센트의 비중), 개방성(30 퍼센트), 경제적 가변성(15 퍼센트), 국제준비금(5 퍼센트)의 가중평균이다. 쿼터 계산 목적상, GDP 는 시장환율(60 퍼센트의 비중)과 PPP 환율(40 퍼센트)에 기준한 혼합 GDP 로 측정된다. 또한 이 공식에는 계산된 쿼터 지분이 회원국들에 대해 분산되는 것을 줄이는 “압축 인자”가 포함되어 있다{독자註: 원문을 봐야 무슨 뜻인지 알 수 있겠다}.

쿼터는 IMF 의 회계 단위인 특별인출권(SDR)으로 표시된다. IMF 의 최대 회원국은 현재 371 억 SDR(약 560 억 달러)의 쿼터를 보유하고 있는 미국이고, (...)

■ IMF 에서 쿼터가 수행하는 몇 가지 주요 역할: 

회원국의 쿼터는 다음과 같은 IMF 와의 재정적, 조직적 관계의 기본적인 측면을 나타낸다.

(1) 출자(쿼터 지분). 회원국의 쿼터 출자는 회원국이 IMF 에 제공할 의무가 있는 재원의 최대 금액을 결정한다. 회원국은 [IMF]에 가입할 때 출자금을 다음과 같이 전액 납입해야 한다: 
  • 최대 25 퍼센트는 SDR 또는 광범위하게 통용되는 화폐(미국 달러, 유로, 엔, 영국 파운드 등)로 납입해야 하고, 나머지 출자금은 회원국 자체 통화로 납입.

(2) 투표권(투표 지분). 쿼터는 IMF의 의사결정 과정에서 회원국의 투표권을 대부분 결정한다. 각 IMF 회원국은 250 개의 기본 투표권을 보유하며, 쿼터가 100,000 SDR 증가할 때마다 1 개의 투표권이 추가된다. 따라서, 미국은 현재 371,743 개의 투표권(총 투표권의 16.74 퍼센트)을 보유하고 있고, 투발루는 현재 268 개의 투표권(총 투표권의 0.01 퍼센트)을 보유하고 있다. 기본 투표권의 수는 2008 년 4 월의 개혁이 발효되면 변경될 것이다.

(3) 금융 사용권. 한 회원국이 IMF 로부터 제공 받을 수 있는 금융 금액(금융 사용 한도)은 쿼터에 기준하여 결정된다. 예를 들면, 한 회원국은 대기 및 확대 협정에 따라 매년 쿼터의 최대 200 퍼센트, 그리고 누적 금액으로 최대 600 퍼센트까지 차입할 수 있다. 그러나, 특별한 상황에서는 더 많은 금액을 차입할 수도 있다. (... 이하 생략)

자료 2: IMF's Organizations and Finances


1. Management: (...)
2. Staff of international civil servants: (...)
3. Quotas
Each member country's quota broadly reflects the size of its economy: the larger a country's economy in terms of output and the larger and more variable its trade, the larger its quota tends to be. For example, the world's biggest economy, the United States, has the largest quota in the IMF.
Quotas, together with the equal number of basic votes each member has, determine countries'voting power. They also help determine how much countries can borrow from the IMF and their share in allocations of special drawing rights or SDRs (the reserve currency created by the IMF in 1969).
  • Countries pay 25 percent of their quota subscriptions in SDRs or major currencies, such as U.S. dollars, euros, pounds sterling, or Japanese yen.
  • They pay the remaining 75 percent in their own currencies. The IMF's lending resources come mainly from the money that countries pay as these quota subscriptions when they become members. (... ...)

The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR serves as the unit of account of the IMF and some other international organizations.

SDR’s value

The value of the SDR is based on a basket of key international currencies—the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-value of the SDR is posted daily on the IMF’s website. The basket composition is reviewed every five years by the Executive Board to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems.

The SDR interest rate provides the basis for calculating the interest charged to members on regular (nonconcessional) IMF loans, the interest paid and charged to members on their SDR holdings, and the interest paid to members on a portion of their quota subscriptions. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on short-term debt in the money markets of the SDR basket currencies.

SDR allocations to IMF members

Under its Articles of Agreement, the IMF may allocate SDRs to members in proportion to their IMF quotas, providing each member with a costless asset. However, if a member’s SDR holdings rise above its allocation, it earns interest on the excess; conversely, if it holds fewer SDRs than allocated, it pays interest on the shortfall.

There are two kinds of allocations:

General allocations of SDRs. General allocations have to be based on a long-term global need to supplement existing reserve assets. Decisions to allocate SDRs have been made three times: in 1970-72, for SDR 9.3 billion; in 1979–81, for SDR 12.1 billion; and in August 2009, for an amount of SDR 161.2 billion.

Special allocations of SDRs. A special one-time allocation of SDRs through the Fourth Amendment of the Articles of Agreement was implemented in September 2009. The purpose of this special allocation was to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the fact that countries that joined the Fund after 1981—more than one-fifth of the current IMF membership—had never received an SDR allocation.

With the general SDR allocation of August 2009 and the special allocation of Setember 2009, the amount of SDRs increased from SDR 21.4 billion to SDR 204.1 billion (currently equivalent to about $317 billion).

5. Gold: (...)
6. Borrowing arrangements: (...)

자료 3: Articles of Agreement of the International Monetary Fund

자료 4: By-Laws Rules and Regulations of the International Monetary Fund

2012년 3월 29일 목요일

[메모] 환율제도의 선택




환율제도는 크게 고정환율제와 자유변동환율제를 양극단으로 하여 이 두 가지를 절충하는 다양한 형태로 분류할 수 있다. 현재 IMF는 환율제도를 8개로 분류하고 있다.
  • 일반적으로 고정환율제도는 한 나라의 대외의존도나 특정국에 대한 수출비중이 높고, 정책당국의 물가정책에 대한 신뢰도가 낮은 경우에 적합한 것으로 알려지고 있다. 
  • 반면 변동환율제도는 경제규모가 크고 금융산업이 고도로 발달되어 있거나, 해외충격에 대한 노출이나 자본이동성이 큰 나라에 바람직하다는 견해가 많다. 
  • 1990년대 동남아 외환위기의 여파로 이들 국가의 환율제도는 환율변동의 신축성을 제고하는 방향으로 이행되었으며, 나라에 따라서는 고정환율제도를 강화하는 경향도 나타났다.

환율제도
  • 고정환율제도: IMF 분류(통화동맹, 통화위원회제도)
  • 중간단계제도: IMF 분류(Crawling Band, Crawling Peg, Peg 및 Band 제도)
  • 자유변동제도: IMF 분류(완전자유변동환율제도, 관리변동환율제도)

자료 : IMF Annual Report on Exchange Arrangements and Exchange Restrictions

한편 환율제도의 선택은 ① 거시경제정책의 자율적인 운용(adjustment) ② 자본이동 촉진을 통한 국제유동성의 확보(liquidity) ③ 환율안정을 통한 통화가치의 신뢰성 확보(confidence) 등 세 가지를 목표로 추구하게 된다. 그러나 이를 동시에 만족시키는 환율제도는 없으므로 환율제도 선택에 있어 삼각의 딜레마(trilemma)에 빠지게 된다(Krugman(1998)).


환율제도의 장단점을 살펴보면 고정환율제는 환율변동에 따른 충격을 완화하고 거시경제정책의 자율성을 어느 정도 확보할 수 있는 장점이 있으나, 이를 위해서는 자본이동의 제약이 불가피하여 국제유동성이 제한을 받게 된다. 이경우 대외불균형이 지속되거나 기초경제여건이 악화되면 환투기공격에 쉽게 노출되는 단점이 있다.

반면 변동환율제는 자본이동이 자유롭게 이루어지므로 국제유동성 확보가 용이하고 외부충격이 환율변동에 의해 흡수됨으로써 거시경제정책의 자율적인 수행이 용이한 장점이 있다. 다만 외환시장 규모가 작고 외부충격의 흡수능력이 미약한 개도국의 경우 환율변동성이 높아짐으로써 경제의 교란요인으로 작용할 가능성이 크다.

이 밖에 통화위원회제도의 경우 국내통화를 미달러화 등에 일정 비율로 고정시킴으로써 유동성을 확보하고 환위험을 방지할 수 있다. 그러나 외환의 공급에 비례하여 국내통화가 자동적으로 공급됨으로써 통화정책의 자율성이 크게 제한되는 단점이 있다.

2012년 3월 27일 화요일

Dic: move (followed by a state, activity, opinion)

10 [VERB] V prep/adv

If you move towards a particular state, activity, or opinion, you start to be in that state, do that activity, or have that opinion.

  • Since the Convention was drawn up international opinion has begun to move against it. 
  • [N-COUNT] His move to the left was not a sudden leap but a natural working out of ideas. (= shift)
Cf. noun 3. [PROGRESS/CHANGE] a change, especially one which improves a situation

[move towards/from/against/to]
  • the country's move towards democracy
  • a move away from traditional industries such as coal mining
  • Much more research is being done, which is a move in the right direction .
...... COBUILD, LDOCE

2012년 3월 25일 일요일

용어 메모


1. 매도제시가(offer price)

  외환거래, bond 및 note 등 유가증권거래에 있어서 딜러가 팔고자 하는 가격을 말하며 ask price라고도 한다. 이와 반대로 사고자 하는 가격은 매입제시가(bid price)라고 한다. 일반적으로 딜러들은 사고자 하는 가격과 팔고자 하는 가격을 동시에 고시(quote)한다. 예를 들어 어떤 본드의 가격이 99-99. 1/2라고 표시되고 액면가격이 1,000달러라고 하면 동 채권의 매입가격은 990달러이며 매도가격은 995달러임을 나타낸다. (→ 매입제시가)
... http://www.keb.co.kr/b2b/minor/dic/5014.htm


2. 자국통화표시환율, 외국통화표시환율(rate in home currency, rate in foreign currency)

    외국통화 1단위와 교환될 수 있는 자국통화의 양으로 표시된 환율을 자국통화표시환율(rate in home currency)이라 하며, 이러한 표시법을 직접표시법(direct quotation) 또는 지급계정표시법(giving quotation)이라 한다. 예를 들면 USD1=820원 또는 원/USD=820으로 표시하는 방법이다.

  한편 외국통화표시환율(rate in foreign currency)이란 자국통화 1단위당 외국통화를 얼마나 교환할 수 있는가를 표시하는 환율로서, 이를 간접표시법(indirect quotation) 또는 수취계정표시법(receiving quotation)이라고도 한다. 예컨대 1원=USD0.0012 또는 USD/원=0.0012로 표시하는 방법이다. 대부분의 국가는 자국내 외환거래에서 자국통화표시법을 사용하고 있다. 다만 영국과 과거 영국의 식민지였던 국가(호주, 뉴질랜드, 아일랜드 등)들만이 외국통화표시환율을 사용하고 있다.

... 외환은행 국제금융용어

2012년 3월 24일 토요일

[메모] 회계원리 노트


자료: 회계원리 노트


1. 회계란 무엇인가
2. 재무제표
3. 회계기준과 회계공준
4. 회계학의 체계
5. 회계전문직
6. 부기의 의의와 종류

7. 거래

7.1 거래의 의의

■ 회계상의 거래란 재무제표의 구성요소에 변화를 가져오는 경제적 사상을 말한다.★

■ 따라서 일상적으로 거래라고 부르더라도 재무제표의 구성요소에 변화를 가져오지 않는 것은 회계상에서 거래로 취급하지 않는다.

■ 재무제표의 구성요소란 대차대조표를 구성하고 있는 자산⋅부채⋅자본과 손익계산서를 구성하고 있는 수익⋅비용을 말한다.  이들 구성요소의 변화는 8가지 유형으로 나타난다.★★

① 자산의 증가
② 자산의 감소
③ 부채의 증가
④ 부채의 감소
⑤ 자본의 증가
⑥ 자본의 감소
⑦ 수익의 발생
⑧ 비용의 발생

■ 복식부기에서는 모든 거래가 이중성을 가지고 있는 것으로 처리하기 때문에 이들 8요소 중 한 항목과 다른 어느 항목이 결합한 형태로 나타난다.  복식부기에서는 거래의 8요소를 이용, 거래를 기본적 회계등식에 의해 이중으로 분석(분개)하여 기록하게 된다.

■ 회계상의 거래는 반드시 자산⋅부채⋅자본의 증감이나 수익⋅비용을 발생시켜야 한다.

■ 따라서 일상생활에서의 거래라고 부르는 것과는 반드시 일치하지 않는다.

■ 예를 들어...
상품의 주문이나 계약 등은 일상생활에서는 거래라고 하나 회계상의 거래는 아니다.
화재나 도난에 의한 자산의 감소는 일상생활에서는 거래라고 하지 않으나 회계상에서는 거래가 된다.  거래는 보통 송품장, 증빙서, 전표, 청구서 등에 의해 식별된다.

7.2 거래요소의 결합관계

■ 복식부기에서는 모든 거래는 거래의 8요소간의 한 항목과 다른 항목이 결합되어 나타난다.

■ 즉 거래는 양면성을 갖게된다.  이때 복식부기에서는 거래요소간의 결합에 대해 일정한 가정을 하고 있다.

■ 자산의 증가⋅부채의 감소⋅자본의 감소⋅비용의 발생은 좌변(차변)에 배치하고,

■ 자산의 감소⋅부채의 증가⋅자본의 증가⋅수익의 발생은 우변(대변)에 배치한다.

■ 거래의 8요소의 결합관계 [p.65 그림 7-1 참조]

8. 분개와 계정

8.1 계정

8.1.1 계정의 의의와 형식

■ 계정이란 자산⋅부채⋅자본⋅수익⋅비용의 증감을 개별적으로 기록하기 위한 특정한 항목을 말한다.  이들 특정한 항목들은 대차대조표나 손익계산서에 보고할 목적으로 최종적으로 분류된 항목이다.  이때 계정은 중요성에 비추어 유사한 종류나 성질을 가진 항목별로 설정된다.

■ 계정은 ① 계정과목, ② 좌변 또는 차변, ③ 우변 또는 대변의 세부분으로 구성

■ 계정의 형식 : T계정(교육용으로 많이 사용), 표준식계정, 잔액식계정

8.1.2 차변과 대변

■ 부기에서는 계정의 좌변을 차변(debit side, Dr.), 우변을 대변(credit side, Cr.)이라고 한다.

■ 이는 별다른 의미가 있는 것이 아니고 회계상의 관습과 규칙에 의한 것일 뿐이다.

※ 영어의 debit이라는 명사는 "채무"(a debt)를 의미하는 라틴어의 debitum에서 나왔다.
credit은 "다른 이에게 귀속된 그 무엇"(something entrusted to another)을 의미하는 라티어 creditum에서 나왔다.  회계에서 debit과 credit은 이러한 의미를 가지고 있지 않다.

■ 차변과 대변이라는 용어는 기록과정에서 반복적으로 사용된다.

■ 따라서 약어로 차변은 차, 대변은 대로 줄여 쓰기도 한다.

■ 반대로 대변금액이 차변금액을 초과하면 대변잔액을 가졌다고 한다.

■ 자산계정은 차변, 부채계정은 대변, 비용계정은 차변, 수익계정은 대변에 정상잔액을 갖는다

8.1.3 계정기입법

■ 계정기입시에는 일정한 법칙이 있는데 이는 전술한 거래의 8요소의 결합관계와 같다.★★

   자산(차변) 부채+자본(대변)
         자산의 증가(+) 자산의 감소(-)
                  부채의 감소(-)                 부채의 증가(+)
                  자본의 감소(-)               자본의 증가(+)
                  비용의 발생                 수익의 발생

[강의노트 중에서] 국제수지와 환율


자료: 국제수지와 환율(International Balance and FX rate)
지은이: 윤선중 교수(한림대)

※ 발췌:

국제수지의 측정

􀂄 외국과의 개별 거래가 자국의 입장에서 외화를 벌어들이는 거래인지 지출하는 거래인지를 구별
􀂄 외화수입을 증가시킨다면 국제수지를 산출하는데 있어서 수입(credit)으로 분류되고 양(+)
􀂄 외화를 지출하게 하는 거래는 지출(debit)로 분류되며 음(-)

[자료취합] 국제수지매뉴얼 제6판 (BPM6)

기본 자료:

1. 6th Edition of the IMF's Balance of Payments and International Investment Position Manua
  - Main page link
  - ...
  - Chapter 11. Primary Income Account

The term “primary income” is introduced. Consistency between international accounts and national accounts is ensured. The meaning and relationship of primary income, property income, and investment income are clarified (paragraphs 11.1–11.3; BPM5  paragraph 267).
A detailed breakdown of investment income is introduced to link with functional and instrument classifications of financial instruments. Income on other investment and income on reserve assets are shown separately. Rent and taxes and subsidies on products and production are included explicitly as primary income items (Tables 11.1, 11.2, and 11.3; BPM5 paragraph 281). 
(....) 
2. 국제수지표 계정 분류 양식 발췌:



3. Revision of the Fifth Edition of the IMF's Balance of Payments Manual (January 2007)



※ 보도자료 및 교육자료 등 부분적 자료:

1. 국제수지통계의 이해와 편제방식 개편 내용 (2011.5.20. 한은금요강좌)
    : 한은 게시판 링크, 구글검색링크

2. [보도자료] 새로운 국제수지매뉴얼(BPM6) 1단계 이행 결과 (한국은행, 2010. 12.08)
    : 한은 게시판 링크, 구글검색링크



2012년 3월 23일 금요일

Dic: a place unto itself, an island unto itself

unto: prep.

1. To.
2. Until: a fast unto death.
3. By: a place unto itself, quite unlike its surroundings.
... The American Heritage


* * *
CF. 

1. 
Hello, can anyone help with this sentence please ?
"The Taoists viewed the body as a small and complete universe unto itself"
"Les Taoistes conçevaient le corps comme un univers miniature parfait en soi"
I'm not sure about the adjectives and "unto itself" (...)
2.
My sense is that "a small and complete universe unto itself" would be translated as "un univers en soi, miniature et parfait." That is, I feel that the phrases and units are different in the French and English versions of the sentence. (...)

3. 
I think your French version sounds better than the original English!! : unto itself is very archaic and pedantic and is found in religious texts from the 18th century and earlier : parfait / en soi sound better to me (in either order i.e. lucas's or your version) because the meaning of the English is that the body is a complete closed unit independent of the universe of which it is a (small) perfect part. The idea of a perfect smaller whole inside/within a perfect larger whole is maybe how Taoists see the universe?

4. 
I have checked with my corpus usage dictionary which gives 50 modern sample uses of any word/phrase; and in modern English "unto itself" is only used in very specific fixed phrases :
  • A law unto itself. a world unto itself, an island unto itself, a means unto itself, an entity unto itself, a world wholly unto itself, sufficient unto itself
  • The meaning is clearly "totally independent as a unity/entity standing on its own" Reference : google "BNC" and type any phrase into the text box - British National Corpus. (...) 


2012년 3월 18일 일요일

예문....



1. Perhaps advances in computation, software, and artificial intelligence will spark yet another industrial revolution.


2. He criticized the economists for an apparently irresistible urge to push their science further than it will go, to answer questions more delicate than our limited understanding of a complicated question will allow.

3. What is the typical pattern of surpluses and deficits of nations?

 - Take a look at the preposition 'of', used two times. Think about the following subject -predicate relationships: 
  • Surpluses and deficits (of some kind) have (a/the) typical pattern.
  • Nations have surpluses and deficits (of some kind).
 - Compare it with another way of exposition like this: Is there a(any) typical pattern of surpluses and deficits of nations?

 - 영문의 각 낱말에만 집착하면 다음 번역을 만난다. (1)보다는 (2)가 나을 것:
  • 1: 여러 나라의 흑자와 적자의 전형적 유형은 무엇인가?
  • 2: 여러 나라에서 흑자와 적자가 나타나는 전형적 유형은 무엇인가?
 - surpluses와 deficits가 어떤 balance의 흑자이고 적자인지에 대한  명시적 언급은 전후 어디에도 없지만, 해당 절의 긴 문맥에서 볼 때 경상수지를 말뜻한다. 따라서 다음 (3), (4) 중의 하나를 번역문으로 택할 예정. 
  • 3: 나라마다 경상수지 흑자와 적자가 나타나는 전형적 유형은 무엇인가?
  • 4: 경상수지가 흑자가 되거나 적자가 되는 각 나라의 전형적 유형은 무엇인가?

[관련항목] power-driven machine

동력기계. 동력 구동식 기계.

자료 1.  INDUSTRIAL REVOLUTION. SEE ALSO, Europe Transformed
Author: Lewis Hackett Date: 1992

Industrialization: The First Phase

Most products people in the industrialized nations use today are turned out swiftly by the process of mass production, by people (and sometimes, robots) working on assembly lines using power-driven machines. People of ancient and medieval times had no such products. They had to spend long, tedious hours of hand labor even on simple objects. The energy, or power, they employed in work came almost wholly from their own and animals' muscles. The Industrial Revolution is the name given the movement in which machines changed people's way of life as well as their methods of manufacture.

(... ...) Changes That Led to the Revolution

The most important of the changes that brought about the Industrial Revolution were[:]
  1. the invention of machines to do the work of hand tools; 
  2. the use of steam, and later of other kinds of power, in place of the muscles of human beings and of animals; and 
  3. the adoption of the factory system. 
(... ...)




자료 3. Line shaft

2012년 3월 14일 수요일

[참고 2] Money works. Money matters



http://www.unc.edu/depts/econ/byrns_web/PrinEcon/PrinText/CE38.pdf

http://www.conferencedevelopments.com/files/Ekstedt.pdf


[참고 1] Money works. Money matters



http://ricardo.ecn.wfu.edu/~cottrell/ancona/pkme.pdf

Radcliffe Rport(1959) Committee on the Working of the Monetary System (Cmnd. 827)

Croom, D. and Johnson, H.(1970), eds. Money in Britain 1959-1969

Khan, R. F.(1972) Memorandum of evidence submitted to the Radcliffe Committee(1958), reprinted in Selected Essays on Employment and Growth, Cambridge, CUP

Kaldor, N.(1964) The Radcliffe Report, in Essays in Economic Policy, vol.1, Duckworth. Reprinted from Review of Economics and Statistics, February 1960

Kaldor, N.(1982) The Scourge of Monetarism, Oxford, OUP

Rousseas, S.(1985) Financial innovation and the contrl of the money supply: the Radcliffe report revisited, in Jarsulic(1985)

Jarsulic, M.(1985) ed. Money and Macro Policy, Dordrecht, Klwer

Moore, B.(1988) Horizontalists and Verticalists: The macroeconomics of credit money, Cambridge, CUP

2012년 3월 11일 일요일

[용어] monetary standards



※ Google found me this document authored by Michael D. Bordo. Thanking to the author for this knowledge source, I keep it as a scrap for my study and later reference. If this post does harm to anyone's intellectual property, I'll delete it as soon as possible. Please notify me on email(upper right place on the screen) or as a comment to this post .

Title: Monetary Standards

An Essay written for the Oxford Encyclopedia of Economic History

A monetary standard refers to the set of monetary arrangements and institutions governing the supply of money. It differs from the term “monetary regime” defined as a set of monetary arrangements and institutions accompanied by a set of expectations─expectations by the public with respect to policymaker actions and expectations by policymakers about the public's reaction to their actions.

We distinguish two aspects of monetary standards/regimes: domestic and international. The domestic aspect refers to the institutional arrangements and policy actions of monetary authorities. The international aspect relates to monetary arrangements between nations. Two basic types of monetary arrangements prevail: fixed and flexible exchange rates, along with a number of intermediate variants including adjustable pegs and managed floats.

Two types of monetary standards/regimes have been present in history,

  • those based on convertibility of all forms of money into currency, generally specie, and 
  • those based on fiat. 
The former prevailed in the world until the 1930s although the Bretton Woods System from 1944-1971 embodied an indirect link to gold; the latter has held sway ever since.


The Theory of Specie Standards as Domestic Standard

The specie standards that were adopted as far back as ancient times are types of commodity money standards. Commodity standards have generally been based on silver, gold or bimetallism (gold and silver coins circulating at a fixed ratio of their weights). However, other commodities such as bronze, copper or Cowrie shells have also been used. Proposals for reform such as basing the monetary standard on a basket of commodities including the precious metals such as Alfred Marshall’s (1926) symetallism (a combination of gold and silver bullion bars in fixed proportions) and Robert Hall’s (1982) ANCAP (a resource unit with fixed weights consisting of: aluminum, copper, plywood and ammonium nitrate).

Under a specie standard such as the gold standard, the monetary authority defines the weight of gold coins, or else fixes the price of an ounce of gold in terms of national currency. By being willing to buy and sell gold freely at the mint price, the authority maintains the fixed price. Ownership or use of gold is unrestricted.
Under the gold standard the money supply consists partially or entirely of the monetary gold stock. A gold standard served as a natural constraint on monetary growth because new production is limited (by increasing costs) relative to the existing stock.
Specie standards provided a self-regulating mechanism that ensured long-run monetary and price level stability. The commodity theory of money most clearly analyzed by Irving Fisher (1922/1965) explained why this was so. The price level of the world, treated as a closed system, was determined by the interaction of the money market and the commodity or bullion market. The real price (or purchasing power) of gold was determined by the commodity market, given the fixed nominal price of gold set by the monetary authorities. The price level was determined by the demand for and the supply of monetary gold. The demand for monetary gold was in turn derived from the demand for money; the supply of the monetary gold stock was a residual defined as the difference between the total world gold stock and the non-monetary demand. Changes in the monetary gold stock reflected gold production and shifts between monetary and non-monetary uses of gold.
Under the self-equilibrating gold standard, shocks to the demand for or supply of monetary gold would change the price level. Demand and supply changes would be reversed as changes in the price level affected the real price of gold, which offset changes in gold production and led to shifts between monetary and non-monetary uses of gold. This mechanism produced mean reversion in the price level and a tendency toward long-run price stability. In the shorter run, shocks to the gold market created price level instability. The empirical evidence suggests that the mechanism worked roughly according to the theory. However the simple picture is complicated by a number of important considerations: technical progress in mining; the exhaustion of high quality ores; and depletion of gold as a durable exhaustible resource [Cagan (1965), Bordo (1981), Rockoff (1984)]. With depletion, in the absence of offsetting technical changes a gold standard must inevitably result in long-run deflation (Bordo and Ellson 1985).

The Theory of Specie Standards as International Standards

The international specie standard evolved from domestic standards with the common fixing of the specie price by different nations. The classical gold standard, which prevailed from 1880 to 1914 was the pinnacle of this evolution. Unlike later arrangements, the classical gold standard was not the result of an international agreement but was driven largely by market forces.
Under the classical gold standard fixed exchange rate system, the world’s monetary gold stock was distributed according to the member nations’ demand for money and use of substitutes for gold. Disturbances to the balance pf payments were automatically equilibrated by the Humean price-specie flow mechanism. Under that mechanism, arbitrage in gold kept nations’ price levels in line. Gold would flow from countries with balance of payments deficits (caused, for example, by higher price levels) to those with surpluses (caused by lower price levels), in turn keeping their domestic money supplies and price levels in line.
Some authors stressed the operation of the law of one price and commodity arbitrage in traded goods prices, others the adjustment of the terms of trade, still others the adjustment of traded relative to non-traded goods prices [Bordo (1984)]. Debate continues on the details of the adjustment mechanism; however, there is consensus that it worked smoothly for the core countries of the world although not necessarily for the periphery which suffered frequent terms of trade shocks and financial crises [Ford (1962), DeCecco (1974), Fishlow (1985)]. It also facilitated a massive transfer of long-term capital from Europe to the new world in the four decades before World War I on a scale relative to income, which has yet to be replicated.
Although in theory exchange rates were supposed to be perfectly rigid, in practice the rate of exchange was bounded by upper and lower limits -- the gold points – within which the exchange rate floated. The gold points were determined by transactions costs, risk and other costs of shipping gold. Recent research indicates that although in the classical period exchange rates frequently departed from par, violations of the gold points were rare [Officer (1996)], as were devaluations [Eichengreen (1985)]. Adjustment to balance of payments disturbances was greatly facilitated by short-term capital flows. Capital would quickly flow between countries to iron out interest differentials. By the end of the nineteenth century the world capital market was so efficient that capital flows largely replaced gold flows in effecting adjustment.    
Central banks also played an important role in the international gold standard. By varying their discount rates and using other tools of monetary policy they were supposed to follow “the rules of the game” and speed up adjustment to balance of payments disequilibria. In fact many central banks violated the rules [Bloomfield (1959), Dutton (1984), Pippenger (1984), Giovannini (1986), Jeanne (1995), Davutyan and Parke (1995)] by not raising their discount rates or by using “gold devices” which artificially altered the price of gold in the face of a payments deficit [Sayers (1957)].  But the violations were never sufficient to threaten convertibility [Schwartz (1984)]. They were in fact tolerated because market participants viewed them as temporary attempts by central banks to smooth interest rates and economic activity while keeping within the overriding constraint of convertibility [Goodfriend (1988)]. An alternative interpretation is that violations of the rules of the game represented the operation of an effective target zone bordered by the gold points. Because of the credibility of the commitment to gold convertibility, monetary authorities could alter their discount rates to affect domestic objectives by exploiting the mean reversion properties of exchange rates within the zone [Svensson (1994), Bordo and MacDonald (1997)].
An alternative to the view that the gold standard was managed by central banks in a symmetrical fashion is that it was managed by the Bank of England [Scammell (1965)]. By manipulating its Bank rate, it could attract whatever gold it needed; furthermore, other central banks adjusted their discount rates to hers. They did so because London was the center for the world’s principal gold, commodities, and capital markets, outstanding sterling-denominated assets were huge, and sterling served as an international reserve currency  (as a substitute for gold). There is considerable evidence supporting this view [Lindert (1969), Giovannini (1986), Eichengreen (1987)]. There is also evidence which suggests that two other European core countries, France and Germany had some control over discount rates within their respective economic spheres [Tullio and Wolters (1996)].

The Specie Standard as a Rule

One of the most important features of the specie standard was that it embodied a monetary rule or commitment mechanism that constrained the actions of the monetary authorities. To the classical economists it was preferable for monetary authorities to follow rules rather than subjecting monetary policy to the discretion of well-meaning officials. Today a rule serves to bind policy actions over time. This view of policy rules, in contrast to the earlier tradition that stressed both impersonality and automaticity, stems form the recent literature on the time inconsistency of optimal government policy.
In terms of the modern perspectives of Kydland and Prescott (1977) and Barro and Gordon (1983), the rule served as a commitment mechanism to prevent governments from setting policies sequentially in a time inconsistent manner. According to this approach, adherence to the fixed price of gold was the commitment that prevented governments from creating surprise fiduciary money issues in order to capture seigniorage revenue, or form defaulting on outstanding debt [Bordo and Kydland (1996)]. On this basis, adherence to the specie standard rule before 1914 enabled many countries to avoid the problems of high inflation and stagflation that troubled the late twentieth century.
The specie standard rule in the century before World War I can also be interpreted as a contingent rule, or a rule with escape clauses [Grossman and Van Huyck (1988)], Bordo and Kydland (1996)]. The monetary authority maintained the standard  - kept the price of the currency in terms of specie fixed – except in the event of a well understood emergency such as a major war. In wartime it might suspend specie convertibility and issue paper money to finance its expenditures, and it could sell debt issues in terms of the nominal value of its undepreciated paper. The rule was contingent in the sense that the public understood that the suspension would last only for the duration of the wartime emergency plus some period of adjustment, and that afterwards the government would adopt the deflationary policies necessary to resume payments at the original parity.
Observing such a rule would allow the government to smooth its revenue from different sources of finance: taxation, borrowing, and seignorage [Lucas and Stokey (1983), Mankiw (1987)]. That is, in wartime present taxes on labor effort would reduce output when it was needed most, but relying on future taxes or borrowing would be optimal. At the same time positive collection costs might also make it optimal to use the inflation tax as a substitute for conventional taxes [Bordo and Vegh (2002)]. A temporary suspension of convertibility would then allow the government to use the optimal mix of the three sources of finance.
The basic specie standard rule is a domestic rule, enforced by the reputation of the specie standard itself i.e., by the historical evolution of specie as money. An alternative commitment mechanism was to guarantee gold convertibility in the constitution as was the case in Sweden before 1914 [Jounung (1984)].
Although the specie standard rule originally evolved as a domestic commitment mechanism, its enduring fame is as an international rule, namely maintenance of specie convertibility to the established par. Maintenance of a fixed price of gold by its adherents in turn ensured fixed exchange rates. The fixed price of domestic currency in terms of specie served as a nominal anchor under the international monetary system.
According to the game theoretic literature, for an international monetary arrangement to be effective both between countries and within them, a time –consistency credible commitment mechanism is required [Canzoneri and Henderson (1991)]. Adherence to specie convertibility rule provided such a mechanism.
In addition to the reputation of the domestic specie standard and constitutional provisions which ensured a domestic commitment, adherence to international specie standard rule may have been enforced by other mechanisms [see Bordo and Kydland (1996)]. These include: the operation of the rules of the game; the hegemonic power of England; central bank cooperation; and improved access to the international capital markets.
Indeed the key enforcement mechanism of the specie standard rule for peripheral countries was access to capital obtainable from the core countries. Adherence to the gold standard was a signal of good behavior, like the “ good housekeeping seal of approval”; it explains why countries that adhered to gold convertibility paid lower interest rates on loans contracted in London than others with less consistent performance [Bordo and Rockoff (1996)].


Fiat Money Standards  (... ...)

The History of Monetary Standards From Specie Standards to Fiat Money

Bimetallism and the Gold Standard (... ...)

The interwar Gold Exchange Standard (... ....)

Bretton Woods (... ...)

The Managed Float and the Fiat Standard 


As a reaction to the flaws of Bretton Woods, the world turned to generalized floating exchange rates in March 1973. Though the early years of the floating exchange rates were often characterized as a dirty float, whereby monetary authorities extensively intervened to affect both the levels and volatility of exchange rates, by the 1990s it evolved into a system where exchange market intervention occurred primarily with the intention of smoothing fluctuations.
The advent of generalized floating in 1973 allowed each country more flexibility to conduct independent monetary policy. In the 1970s inflation accelerated as advanced countries attempted to use monetary policy to maintain full employment. However, monetary policy could be used to target the level of unemployment only at the expense of accelerating inflation [Friedman (1968), Phelps (1968)]. In addition the USA and other countries used expansionary monetary policy to accommodate oil price shocks in 1973 and 1979. The high inflation rates that ensued led to a determined effort by monetary authorities in the USA and UK and other countries to disinflate.
The 1980s witnessed renewed emphasis by central banks on low inflation as their primary (if not sole) objective. Although no formal monetary rule has been established, a number of countries have granted their central banks independence from the fiscal authority and have also instituted mandates for low inflation or price stability.
In some respects for the US and other major countries there appears to be a return to a rule like the convertibility principle and the fixed nominal anchor of a specie standard.   

The European Monetary Union

Within the context of the worldwide shift towards a floating exchange rate regime, the majority of European countries have opted for a monetary union. The EMU has many attributes of the classical gold standard including perfectly fixed exchange rates (one national currency) and the free mobility of goods, capital and labor. It differs significantly however in that it is based on a fiat standard. The Euro is issued and controlled by the European Central Bank. The actions of the independent ECB are constrained by a mandate for low inflation which its founders hoped would serve as the type of credible nominal anchor that gave long-run price stability to the classical gold standard.

Michael D. Bordo
Rutgers University and
NBER.
  
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2012년 3월 8일 목요일

[용어] reserve market

1.


(... ) 따라서 다음 절에서는 실제의 지준금시장(reserve market)을 모형화하고 이에 따라 중앙은행이 복수정책변수를 활용하는 경우 통화충격이 실물경제와 물가에 미치는 영향을 추정해 보고자 함.

(...) 예를 들어 지준금에 대한 총수요가 증가할 경우(즉 vd > 0) 한국은행은 비차입지준금의 공급을 늘려 콜금리가 상승하는 것을 막는다는 것임.




[메모] 16.2. The Federal Reserve and the Banking System


지은이: Kevin D. Hoover (Cambridge University Press, 2011)

※ 발췌:

16.2. The Federal Reserve and the Banking System

16.2.1. The Cental Bank

Some History: (... ...)

The Structure of the Federal Reserve System

Federal Reserve Act divided the country into twelve districts, each with a Federal Reserve Bank. The locations of the banks are a legacy of the distribution of economic activity, population, and, perhaps more important, the balance of political power in Congress in 1913. Were the Federal Reserve to have been created early in the 21st century, it is unlikely that two Federal Reserve Banks would be located in Missouri(St. Louis and Kansas City).

Formally, each Federal Reserve Bank is a private corporation owned by the member banks in its district. Practically, the Federal Reserve Banks are government agencies. For example, except for a fixed dividend paid to the member banks, the profits of the Federal Reserve Banks are paid to the Federal government; and, although the district banks have some freedom in their day-to-day operations, all important matters of monetary policy and banking regulation are guided by the Board of Governors of the Federal Reserve System in Washington, DC. The Federal Reserve System(the Board plus the 12 district banks) is by its own description "an (... ...)

Figure 16.2. The Federal Funds Market. The supply of reserves depends largely on the past open-market operations of the Fed, and insensitive to the level of the Federal-funds rate. The demand for reserves depends on the opportunity cost to banks of holding them, which is a negative function of the Federal-funds rate: a bank that holds a dollar of reserves loses the interest it could have earned by lending it on the Federal Funds market, but gains not having to go to the market itself to borrow if it finds itself unexpectedly short of reserves. Equilibrium is, naturally, where supply equals demand, and it determines the Federal-funds rate.

Federa funds lending is literally overnight lending (...).

16.2.3. The Mechanics of Monetary Policy

To understand how monetary policy works, we must first understand the structure of the market for bank reserves(Federal funds). In 2008, the Fed began to pay interest on reserves at Federal Reserve banks.[주4] This is a major change in the operation of monetary policy. It will be easier, however, if we first consider how the Federal funds market operated for most of the period since WWII when the Fed paid no interest on reserves. We shall then consider the recent change.

The Classic Federal Funds Market

The Federal Funds(or Reserve) Market can be described in a simple supply-and-demand diagram. In Figure 16.2, The Fed' supply of reserves to the market is shown as a vertical line above R. The supply is determined mostly by the Fed's purchase of government bonds and does not change no matter how the Fed-funds rate(r_FF) may change[주5] 

[주5] This is a simplification because banks may also borrow reserves from the FEd(discount loans). Such borrowing becomes more attractive than borrowing from other banks whenever the discount rate is lower than the Federal-funds rate. Recognizing this gives the reserve-supply curve a more complicated shape. But under the classic Fed rules, the Fed sets the discount rate above the Federal-funds rate, so there is very little discount borrowing; thus, we can usually ignore these complications.

Banks demand reserves to fulfill their legal reserve requirements and their prudential needs. Unhappily for the banks, under its "classic" operating procedures, the Fed paid no interest on reserves. Nevertheless, under the classic operating procedures a bank can profitably lend its excess reserves to other banks that need them. Each bank must consider the opportunity cost of hold an extra dollar of reserves.

On the one hand, if the bank holds the dollar, it loses what it could earn from lending itㅡthat is, the interest, measured by the Fed-funds rate(r_FF). 

On the other hand, if the bank holds the dollar of reseres, that dollar remains available in case it is neede to honor an outstanding check or electronic funds(or wire) transfers. What is the value of that? If the bank did fall short, it would itself have to borrow the dollar and pay the the Federal-funds rate. As is generally true with economic decision, the bank must choose its course of action without knowing the outcome. It may decide to hold the dollar and yet, in the end, not need it. The the bank loses the interest with certainty. But there is some probabiity (call it 'prl' for 'probability of reserve loss') that the bank will be called on to use the dollar; then holding it avoids the need to borrow to meet its commitments. The value of this insurance is the probability of reserve loss times the cost of borrowing at the Federal-funds rate: prl×r_FF.

The opportunity cost of holding a dollar of reserves is then the certain loss of not lending it out less the probabilistic gain of avoiding having to borrow:
opportunity cost = r_FF-prl(r_FF) = (1-prl)r_FF
Notice that as the Fed-funds rate rises, the opportunity cost itself rises. When the opportunity cost is higher, a bank wishes to hold fewer reserve. As a result, the demand for reserves for the banking system should be downward sloping in Figure 16-2. Notice also, that as the probability of reserve loss increases, the lower the opportunity cost. So, at each Fed-funds rate, the banks would demand more reserves, and reserve-demand curve would shift to the right.

All of the reserve outstanding must be held by one bank or another. Any bank unwilling to hold them at a particular Fed-funds rate will try to lend (... 631p ...)


[발췌] Federal Reserve System: background, analyses and bibliography

자료: Federal Reserve System: background, analyses and bibliography

편저자: George B. Grey, (발행인 Nova Publishers, 2002)


※ 발췌(excerpts):
* * * 

Chapter 2. Monetary Policy And the Economy

(... ...) 

Monetary Policy And the Reserve Market

The initial link between monetary policy and the economy occurs in the marekt for reserves. The Federal Reserve's policies influences the demand for or supply of reserves at banks and other depository institutions, and through this market, the effects of monetary policy are transmitted to the rest of the economy. Therefore, to understand how monetary policy is related to the economy, one must first understand what the reserves market is and how it works.

Demand for Reserves

The demand for reserves has two components: required reserves and excess reserves. All depository institutionsㅡcommercial banks, saving banks, savings and loan associations, ad credit-unionsㅡmust retain a percentage of certain types of deposits to be held as reserves. The reserve requirements are set by the Federal Reserve under the Depository Institutions Deregulation and Monetary Control Act of 1980. At the end of 1993, 4,148 member banks, 6,042 nonmember banks, 495 branches and agencies of foreign banks, 61 Edge Act and agreement corporations, and 3,238 thrift institutions were subject to reserve requirements.

Since the early 1990's, reserves requirements have been applied only to transaction deposits(basically, interest-bearing and non-interest bearing checking accounts). 
  • Required reserves are a fraction of such deposits; the fractionㅡthe required reserve ratioㅡis set by the Board of Governors within limits prescribed by law. Thus, total required reserves expand or contract with the level of transaction deposits and with the required reserve ratio set by the Board; in practive, however, the required reserve ratio has been adjusted only infrequently. 
  • Depository institutions hold in one of two forms: vault cash (cash on hand at the bank) or, more important for monetary policy, required reserve balances in accounts with the Reserve Bank for their Federal Reserve District.

Depositories use their accounts at Federal Reserve Banks [:]
  1. not only to satisfy their reserve requirements 
  2. but also to clear many financial transactions. 
Given the volume and unpredictability of transactions that clear through their account every day, depositories need to maintain a cushion of funds to protect themselves against debits that could leave their accounts overdrawn at the end of the day and subject to penalty.
  • Depositories that find their required reserve balances insufficient to provide such protection may open supplemental accounts for required clearing balances. These additional balances earn interest in the form of credits that can be used to defray the cost of services, such as check-clearing and wire transfers of funds and securities, that the Federal Reserve provides.
Some depository institutions choose to hold reserves even beyond those needed to meet their reserves and clearing requirements. These additional balances, which provide extra protection against overdrafts and deficiencies in required reserves, are called excess reserves; they are the second component of the demand for reserves (a third component if required clearing balances are included). In general, depositories hold few excess reserves because these balances do not earn interest; nonetheless, the demand for these reserves can fluctuate greatly over short periods, complicating the Federal Reserve's task of implementing policy.

Supply of Reserves

The Federal Reserve supplies reserves to the banking system in two ways:
  1. Lending through the Federal Reserve discount window
  2. Buying government securities(open market operations).
Reserve obtained through the first channel are called borrowed reserves. The Federal Reserve supplies these directly to depository institutions that are eligible to borrow through the discount window. Access to such credit by banks and thrift institutions is established by rules set by the Board of Governors, and loans are made at a rate of interestㅡthe discount rateㅡset by the Reserve Banks and approved by the Board. The supply of borrowed reserves depends on the initiative of depository institutions to borrow, though it is influenced by the level of the discount rate and by the terms and conditions for access to discount window credit.

In general, banks are expected to come to the discount window to meet liquidity needs only after drawing on all other reasonably available sources of funds, which limits considerably the use of this source of funds. Moreover, (... ...) As a consequence, the amount of reserves supplied through the discount window is generally a small portion of the total supply of reserves.

The other source of reserve suppy is nonborrowed reserves. Although the supply of nonborrowed reserves depends on a variety of factors, many of them outside the day-to-day control of the Federal Reserve, the system can exercise control over this supply through open market operationsㅡthe purchase or sale of securities by the Domestic Trading Desk at the Federal Reserve Bank of New York. When the Federal Reserve buys securities in the open market, it creates reserves to pay for them, and the supply of nonborrowed reserves increases. Conversely, (...) , and the purchases are effectively paid for by additions to or subtractions from a depository institution's reserve balance at the Federal Reserve.

Trading of Reserves

Depository instituions actively trade reserves held at the Federal Reserve among themselves usually overnight. Those with surplus balances in their accounts transfer reserves to those in need of boosting their balances. The benchmark rate of interest charged for the short-term use of these funds is called the federal funds rate. Changes in the federal funds rate reflect the basic supply and demand conditions in the market for reserves.

Equilibrium exists in the reserves market when the demand for required and excess reserves equals the supply of borrowed plus nonborrowed reserves. Should the demand for reserves riseㅡsay, because of a rise in checking account depositsㅡa disequilibrium will occur, and upward pressure on the federal funds rate will emerge. Equilibrium may be restored by open market operations to supply the added reserves, in which case the federal funds rate will be unchanged. It may also be restored as the supply of reserves increases through greater borrowing from the discount window; in this case, interest rates would tend to rise, and over time the demand for reserves would contract as reserve market pressures are translated, through the actions of banks and their depositors, into lower deposit levels and smaller required reserves. Conversely, should the supply of reserves expandㅡsay because the Federal Reserve purchases securities in the open marketㅡthe resulting excess supply will put downward pressure on the federal funds rate. A lower federal funds rate will set in motion equilibrating forces through the creation of more deposits and larger required reserves and lessend borrowing from the discount window.

(... ...) 

Chapter 3. The Implementation of Monetary Policy

The Federal Reserve uses the tools of monetary policyㅡopen market operations, the discount window, and reserve requirementsㅡto adjust the supply of reserves in relation to the demand for reserves. In so doing, it can influence the amount of pressure on bank reserve positions and, hance, the federal funds rate.

In general, The Federal Reserve can take one of the two basic approached to affect reserves:
  • It can target a certain ^quantity^ of reserves, allowing changes in the demand for reserves to influence the federal funds rate. 
  • It can target the ^price^ of reserves (the federal funds rate) by adjusting the supply of reserves to meet any change in the demand for reserves.

The Federal Reserve has used variations of these basic approaches over the years.

Operational Approaches: (... ...)


Open Market Operations

Open market operations involves the buying and selling of securities by the Federal Reserve. A Federal Reserve securities transaction changes the volume of reserves in the depository system; A purchase adds to nonborrowed reserves, and a sale reduces them. In contrast, the same transactions betwen financial institutions, business firms, or individuals simply redistributes reserves within the depository system without changing the aggregate level of reserves.

When the Federal Reserve buys securities from any seller, it pays, in effect, by issuing a check on itself. When the seller deposits the check in its bank account, the bank presents the check to the Federal Reserve for payment. The Federal Reserve, in turn, honors the check by increasing the reserve account of the seller's bank at the Federal Reserve Bank. The reserves of the seller's bank rise with no offsetting decline in reserves elsewhere; consequently, the total volume of reserves increases. Just the opposit occurs when the Federal Reserve sels securities: The payment reduces the reserve account of the buyer's bank at the Federal Reserve Bank with no offsetting increase in the reserve account of any other bank, and the total reserves of the banking system decline. This characteristicㅡdollar-for-dollar change in the reserves of the depository system with a purchase of sale of securities by the Federal Reserveㅡmakes open market operatins the most powerful, flexible, and precise tool of monetary policy.

In theory, the Federal Reserve could provide or absorb bank reserves through market transactions in any type of asset. In practive, however, most types of assets cannot be traded readily enough to accommodate open market operations. For open market operations to work effectively, the Federal Reserve must be able to buy and sell quickly, at its own convenience, in whatever volume may be needed to keep the supply of reserves in line with prevaiing policy objectives. These conditions require that the instrument it buys or sells be traded in a broad, highly active market that can accommodate the transactions without distortions or disruptions to the market itself.

The market for U.S. government securities satisfies these conditions, and the Federal Reserve carries out by far the greatest part of its open market operations in that market. The U.S. government securites market, in which overall trading averages more than $100 billion a day, is the broadest an most active of U.S. financial markets. (... ...) The Federal Reserve's holding of government securities are tilted somewhat toward Treasury bills, which have maturities of one year or less(table 3.1). The average maturity of the Federal Reserve's portfolio of Treasury issues is only a little more than 3 years, somewhat below the average maturity of roughly 5.5 years for all outstanding marketable Treasury securities. (...)

Other Factrs Influencing Nonborrowed Reserves: (... ...)


Techniques of Open Market Operatins : (...)

(... ...)


Chapter 8. Money And the Federal Reserve System: Myth and Reality (G. Thomas Woodward )

For a long time, few people were aware of the Federal Reserve (Fed). This is no longer true. Over the last two decades, awareness of the institution has increased considerably. Most people know that it has something to do with interest rates. A fair number can identify it with monetary policy.

But a great deal of mystery still surrounds the organization. In part, this is due to its unique structure. The blending of private and public institutional arrangements, and the independence it has in making policy, make it an anormalous structure in government. The mystery is compounded by secrecy.  The deliberations of the organization's policy-making body are revealed only after a time lag. And independent audits of the organization are somewhat circumsribed.

These characteristicsㅡand the enormous influence that the Fed has over economic conditionsㅡhave given rise to a great deal of conjecture concerning its nature and operations. The theories and suspicions about the system underlie monetary reform proposals frequently advanced by citizens, as well as various complaints and petitions sent to the Members of Congress.

Many of these claims asserted about the Fed are untrue. Others are only partially true. This report addresses various claims about the Federal Reserve Systemㅡspecifically those that are a matter of fact and can be either verified or refuted.

Structure, Authority, And Powers

Creation of the Fed

The Federal Reserve System was created by the Federal Reserve Act of 1913. Some literature on the Fed implies that the Act was passed surreptitiously, hastily or even illegally.

Although the Act was passed in the final days of the legislative session, it had been debated for some time in earlier versions. A bil to create the Federal Reserve System was introduced in the House of Representatives in late summer, 1913. The house passed, 299 to 68, its versions in December 22, 1913. ^The Act was passed by the House of Representatives by a vote of 298 to 60, and the Senate in a vote of 43 to 25.^ It was signed into law by President Woodrow Wilson on December 23, 1913.

It is often claimed that the Federal Reserve Act originated in a secret meeting of bankers on Jekyll Island, Georgia in 1910, who then mananged a conspiracy to guide their plan to enactment. Reliable evidence exists that such a secret conference took place. The conference appears to have played an important part in shaping what became known as the "Aldrich Plan."[n1] The secrecy was most likey an effort to publicly distance the plan from the "Wall Street bankers" that had a role in developing it.

^The Aldrich plan however, did not become law.^ By the time Republican legislators introduced the proposal for a "National Reserve Association"(NRA), the midterm elections of 1910 changed control of the Congress from the Republicans to the Democrats. Thus, despite (or because of) President Taft's interest in the legislation, it did not even come before the house for a vote. By the time the Federal Reserve Act was introduced Senator Aldrich had left the Senate, and the Democratic party controlled both the Congress and the White House.

The proposal for an NRA was different from the Federal Reserve System in a couple of important ways. First, it was like a central bank in that it was private. Although its 46 directors included (...), the Association clearly would have been in control of people elected by the banks. Second, even though it had 15 administrative districts, the NRA was centralized into a single entity.

In contrast, the Federal Reserve System was created as a hybrid-public operation in which the Federal Reserve Board was a federal agency appointed by the President. Moreover, in the system as it was created in 1913, the 12 regional Federal Reserve Banks were regarded as relatively autonomous, such that total monopolization of reserves was believed to be avoided.[n2]

The proposed NRA and the Federal Reserve were both viewed as systems for stabilizing credit flows and servicing the payments system, and not as agencies for making explicit monetary policy.

Public or Private

The public/private nature of the institution has given rise to the claim that the Fed is a "private corporation." This claim is not correct. Part of the system consists of private corporations. Part is a federal agency.

^The Board of Governors of the Federal Reserve Systems{System in singular??} is a government agency.^ Its employees are employees of the federal government, paid in accordance with federal government pay acres, and part of the federal employment retirement system. The premises are federal government property. The seven Board members are appointed by the President with advice and consent of the Senate in the same fashion as other government appointees.

Under the supervision of the Board of Governors are 12 regional Federal Reserve Banks. These are private institutions with certain privileges granted to them, restricted to conducting business specified by the Federal Reserve Act. As private institutions, they are "owned" by the "stockholders," they make their own pay and hiring policies, and they pay local property taxes.

For some purposes, however, they are treated as instumentalities of the federal government. They examine, regulate, and supervise some operations of their member banks: a public functions. Hence, they are exempt from state and loval ^income^ taxes. They also are treated as government agencies with respect to certain statutes. But for most other purposes, the 12 regional banks are legally regarded as private.[n3]

[n3] For a more detailed description of the public/private nature of the banks, see Federal Reserve Banks: Federal or Private Entities? By Maureen Murphy. CRS Report 89-508 A, August 1989. 15.p.

The system as a whole is subject to congressional oversight. As required by law, twice a year the Chairman of the Board of Governors must consult with the House and Senate Banking Committees concerning the conduct of monetary policy. Other Federal Reserves actions and policies are also subject to the scrutity of the Congress.


Control of the FED

Each regional Federal Reserve Bank has 9 directors. 6 of these directors are selected by the member banks that own it("class A" and "class B" directors). The other 3("class C") are appointed by the Board of Governors. The Chairman and Deputy Chairman of each regional Federal Reserve Bank are appointed by the Board of Governors from among the class C directors. The directors oversee operations of their Bank, select the President and first vice President of their Bank (and determine their salaries) ^all subject to overall supervision and approval by the Board of Governors.^

Because the regional Federal Reserve Banks are privately owned, and most of their directors are chosen by their stockholders, it is common to hear assertions that control of the Fed is in the hands of an elite. In particular, it has been rumored that control is in the hands of a very few people holding "class A stock" in the Fed.

As explained, there is no stock in the ^system^, only in each regional Bank. More important, ^individuals do not own stock^ in Federal Reserve Banks. The stock is held only by banks who are members of the system. Each bank holds stock proportionate to its capital. Ownership and membership are synoymous. Moreover, ^there is no such thing as "class A" stock.^ All stock is the same.

This stock, furthermore, does not carry with it the normal rights and privileges of ownership. Most significantly, member banks, in voting for the directors of the Federal Reserve Banks of which they are a member, do not get voting rights in proportion to the stock they hod. Instead, each member bank regardless of size gets one vote. ^Concentration of ownership of Federal Reserve Bank stock, therefore, is irrelevant to the issue of control of the system.^


Banks and Control of Monetary Policy

While the Board of Governors exercises overall supervision, and exclusively, controls some aspects of the system, such as discount rates and banking regulation, monetary policy is mostly determined by the Federal Open Market Committee(FOMC). This committee conists of the 7 members of the Board of Governors, the president of the NYFRB, and 4 of the remaining 11 regional Federal Reserve Bank presidents (the latter on a rotating basis). Majority controls, thus, still rests with the presidentially appointed Board members.


The presence of the regional Federal Reserve Bank presidents on the Committee causes some concern about the influence of bankers in the making of monetary policy. They are chosen by direcrtors who are largely chosen by the member banks themselves. (However, they are chosen only with the approval of the Board of Governors.)[n4] Further concern arises from the "Federal Advisory Council," dating from the system's creation, which provides bankers confidential and direct input into the consideration of the Federal Reserve policies.[n5]

Consequently, monetary policy is partly under the influence of persons not appointed by the President or approved by the Senate. The arrangement raises the possibility that some conflict of interest exists, since these members of the FOMC might be inclined to pursue monetary policies that increases bank profits instead of promoting the general economic well-being of the country.[n6]

How The Federal Reserve System Works

Creating Money


The economy principally employs two methods of engaging in transactions. One is cash. The other consists of debiting accounts. Banks are central to both methods.

In the case of cash, banks stand as a source of cash for customers. The Federal Reserve, in turn, is the source of cash for banks. Paper currency is printed in the Treasury department's Bureau of Printing and Engraving. It is then "sold" to the Federal Reserve Banks at the printing cost, roughly 3 to 4 cents per note, regardless of denomination. Banks keep accounts with the Fed and when they require cash for their customers, they buy it at face value, having their accounts debited. In the process, the Federal Reserve profits by the difference between the printing cost and the face value (less the costs of the operation).

But most transactions are not conducted with cash. In most cases, members of the public maintain accounts at depository institutions and pay by authorizing a transfer from their account to the account whomever they are paying. Many of these authorizations occur by means of check. Many others are effected by means of various electronic transfers. In every case, one account is debited, and another credited, completing the transaction.

Since many institutions are involved a clearing mechanism must exist to make these transfers across the different banks. In additionㅡbecause for any bank on any day, debit and credits do not equal each otherㅡit is necessary to maintain balances to handle the net difference. The Federal Reserve acts as the clearinghouse for most of these transfers.[n7] It, therefore, is the banker's bank, and holds balance of its members. These clearing balance are supplemented by requited balances("required reserves") mandated by law. Banks do not earn interest on the balances at the Fed, so that the Fed makes a profit from them in the same way it makes a profit from issuing currency.

The balance available to serve as reserves place a limit on the amount of money that can be generated by banks. To ensure sufficient reserves on hand for clearing debit and to serve the daily cash needs of their customers, banks must be careful not to lend out all of the funds deposited with them, and to always keep some on hand (see below).

More balance can be created by the Fed as it chooses. It does this by entering the open market and buying securities (i.e., interest-earning debt of the government). To purchase securities, it essentially writes a check on itself. The bank that ultimately receives this payment as a deposit gets its accounts with the Fed credited by the amount, allowing it to make additional loans. The Fed can achieve the opposit by selling a security that it brought sometimes in the past. In selling the security, it receives a payment on an account at a bank, which gets its account debited (and which will find it must cut back on its planned lending activity).

As a result, the buying and selling of securities on the open markets is the principal means by which the Fed influences the money supply. Buying securities, it injects money into the system. Selling them, it removes money from the system. Between augmenting these accounts (creating reserves) and selling currency, the Fed acquires a large portfolio of interest-earning securities that provide a profit.

One method of creating money does not earn profits for the Fed: coins. The system of metal coins is somewhat different. Coins, too, cost only a fraction of their face value to create (being mostly "clad" coins made of nickel, zinc, and copper). But in the case of coins, the FEd pays face value to the mint, with the profits being place in a revolving coinage fund. The effect on the economy is the same, and it has the same implications for real government outlays and income. Only the accounting differs.


Commercial Banks and Fractional Reserves

At the base of the system, of course, are banks (and credit unions and savings and loans). These institutions are intimately involved in the money-creation process. This involvement is criticized by some commentators who regard the creation of money as a strict government privilege that they feel should not be permitted of private firms. However, bank involvment in money creation is almost impossible to avoid. Moreover, the benefits of banks' role in money creation go largely to the public, not to the banks themselves.

Banks lend out other people's money. Bank customers who borrow the money pay interest for the privilege. The interest pays for the banks' expenses of carrying on business, interest to those who have placed their funds with the banks, and profits to the owners of the banks. Hence the bank intermediates between people who have spare resources and those who want to use those resources.

Banks (and credit unions and savings and loans) are "depository" institutions. In contrast to other financial intermediaries such as brokerage firms (which invest their customers' money such that the customer accepts the risk of loss), a depository institution accepts funds "on deposit," i.e., on the condition that the bank will return the principal to the depositors regardless of how well or badly the institution invests the funds. Hence, a depository institution absorbs much of the risk of loss in lending out its depositors' money.

Because banks are intermediaries, only a fraction of the money that people deposit with them is kept on hand. Most is lent out. ^The fact that banks keep on hand only a fraction of the funds deposited with them is no secret,^ and it is apparent to anyone who thinks about it: The lending out of money on deposit is how a bank is able to pay interest to its depositors for their funds. Otherwise, depositors would have to pay fees to the bank for safekeeping their money.

The practice of keeping only a fraction of deposits on hand has a cumulative effect for the banking system as a whole. Effectively, it permits the banking system to "create" money. If a given sum of cash is deposited in bank A, and half of it is lent out, whoever borrows it spends it, and the money becomes the deposit in bank B for someone else. Half of that sum is them lent out, spent and deposited. The process continues until the total amount of deposits is a multiple of the initial amoun t of cash. In this example, the cumulative total is ultimately twice the initial amount. In practice, the multiple depends on what fraction is kept on hand as reserves by the bank and what fraction is kept as "poket cash" outside the banking system.

Thus, "^fractional reserve banking" effectively permits the creation of money^ by the banking system to a multiple of the "base" money (typically created by the government). ^But while the system as a whole creates money, individual banks generally do not.^ Even though each bank may have in checking accounts a sum that is equal to the money that was deposited with it, as a group, total deposits in all banks are a multiple of the initial account.

This means, of course, that for a given supply of money in the economy, the existence of money generated by banks through fractiona reserve banking reduces the amount of money that the government creates. When governments create money, they profit by difference between the cost of printing it and its face value. Hence, fractional reserve banking reduces the potential income to the government from money creation(called "seignorage").

^Fractional reserve banking is a natural, common, and indeed unavoidable process.^ It is not an artifical construct of law or of central bank policy. Whenever and wherever bankers, goldsmiths and traders have accepted funds deposited with them, fractional reserve banking has emerged. It quickly becomes obvious to any businessman who accepts deposits that while some customers come to withdraw money, others come to deposit it. Only a fraction of the total deposits at a bank needs to be kept on hand for normal day-to-day banking. Even an unexpected shortfall one day at a bank can be remedied by briefly borrowing from another bank. The consequence is that a portion (usually the majority) of a country's money supply is generated by the banking system.


This process of lending out deposits can come in a number of forms. Banks in years past issued currency(bank notes). Now they mostly use checking accounts. Receipts for deposits have served the same role. Despite any laws that might be enacted to prevent fractional reserve banking, ^there is a strong incentive for the "banking" system to come up with something of its own that will serve as money because it is in virtually everyone's interest to do so.^ Depositors come out ahead because their deposits earn, rather than cost, money. Borrowers have access to funds at an interest rate they might not have otherwise obtained. Bankers make profits. Society is better able to channel idle resources into economically productive activity.

Fractional reserve banking in some form or other is virtually impossible to prevent. But this difficulty in preventing the creation of fraction reserves also helps ensure that institutions do not profit excessively from it. Although, in essence, fractional reserve banking confers money creation powers on the private banking sector, ^the loss to the government primary{primarily} goes to the benefit of the public^, not the banks. The potential profits from money creation through account expansion gives banks an incentive to expand their activities. This expansion can come only from attracting more deposits. The primary means of attracting deposits is by offering higher interest rates or more services. As a consquence, the banks tend to bid away the excess profits, and the benefits go to customers. Fractional reserve banking is therefore a means of reducing the public's sacrifice of interest earnings to the government. ^The public, not the banking system, is the ultimate beneficiary of fractional reserve banking.^

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