Talk:Central bank
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State-owned vs privately-owned
[edit]It would be interesting and very informative to classify the banks as either state owned or privately owned. I know the distinction between the two is not always so obvious, but I'm sure some kind of a compromise can be made.
I did a good amount of googling to find out those I didn't already know.
State owned and controlled banks
[edit]- Bank of Cuba
- Bank of Libya
I also believe that these are:
- Central Bank of the Islamic Republic of IRAN
- Central Bank of the Democratic People's Republic of Korea (north korea)
- Norges Bank (Bank of Norway) "Norges Bank is a separate legal entity owned by the state."
Independent banks
[edit](where the 'democratic' bodies of government might or might not have some kind of saying, these could be separated into two categories)
- Federal Reserve
- Bank of Canada
- Bank of Britain
- Bank of France
- Bank of Sweden & Bank of Finland
- Deutsche Bundesbank ('Bank of Germany')
- Bank of Saudi Arabia
- Banco Central de Chile (Central Bank of Chile)
- Bank of Japan
- NB "Bank of Britain" does not exist - should be Bank of England 82.46.234.167 22:33, 6 February 2007 (UTC)
- I'm sorry, but it says almost everywhere I look on the internet that the Bank of England is nationalised http://www.bankofengland.co.uk/about/parliament/index.htm and "wholly-owned by Government". Isn't that the same as state owned? In fact I am trying to find a central bank that is not priately owned apart from the Fed. Any help? User:Pzyktzle 07:20, 23 March 2008 (UTC0)
- YOu have to draw a distinction between state-owned and government-controlled here. The Bundesbank, for instance, is, and has always been, state-owned - the German Federal Government is its only shareholder, and the bank pays out its annual profits to the government. In its day-to-dsay operations, it is autonomous, however, and legally prohibited from taking instructions from the government or any other German public body. The Bank of England was nationalised in 1946, but granted independence only in 1997. SchnitteUK (talk) 22:11, 14 July 2010 (UTC)
- I'm sorry, but it says almost everywhere I look on the internet that the Bank of England is nationalised http://www.bankofengland.co.uk/about/parliament/index.htm and "wholly-owned by Government". Isn't that the same as state owned? In fact I am trying to find a central bank that is not priately owned apart from the Fed. Any help? User:Pzyktzle 07:20, 23 March 2008 (UTC0)
Those I couldn't figure out at all
[edit]- State Bank of Pakistan (the name could implify state ownership)
- Central Bank of Syria ("The Central Bank of Syria is an independent public sector establishment operating under the guarantee of the state , and within the guidelines issued to it by the Council of Ministers . The Capital of the bank is fully subscribed by the state.")
According to this, a good thumb rule seems to be that those counties treatened or blockaded by the U.S. have fully state owned central bank, except in Norway.
Any thoughts or opinions on this? — Preceding unsigned comment added by Finlander (talk • contribs) 00:33, 7 January 2004 (UTC)
- Only these: that in those cases where the bank does operate efficiently as an instrument of national policy, you may be looking at a national bank as opposed to a "central bank," -- and how ironic it would be if the U.S., which pioneered the concept of a national bank, were to have gone full circle to trying to suppress those impulses in other nations. --Herschelkrustofsky 10:59, 14 October 2004 (UTC)
There is nothing truly national about the Federal Reserve, it is a private corporation. Just like the Bank of England. Although it seems that way, intended apparence, it is a private corporation with shareholders. The reason of the countries without a central bank (private corporation) being threatened and blockaded is just that. It has been going on a long time, financiers have financed nations in war thereby always winning, because both sides endebt themselves. Then, these people implant a financial power structure thanks to the debt nations hold towards them. Much of the west is controlled in this way as is Japan and others. So they want their elitist oligarchic power structure in other nations that don't have it yet, no matter what the cost. The madness of grandeur. Pepitopax 20:39, 15 April 2006 (UTC)
Central bank v national bank
[edit]Excuse me for choking on my breakfast. The distinction here (and at national bank) is complete BS, probably driven by the peculiar status of the US Federal Reserve. A central bank is responsible for monetary policy, and is usually state-owned and non-autonomous (subject to political decision-making on interest rates etc). A "national bank" is simply a state-owned bank (when it isn't just a name for an ordinary private bank making itself sound big, eg "First National Bank"). It is a big deal when the usual central bank model (state-owned, politician-run) is not used - see the setting-up of the independent Bank of England in 1997 and ECB in 1999. (Enhanced credibility and so forth are supposed to make monetary policy more effective and enhance economic stability by leaving experts to try to hit well-defined targets. Expectations etc.) The Fed is a rare exception in being not just independent from government, but privately-owned. Rd232 14:54, 1 January 2005 (UTC)
- Actually, the Fed is not the exception, it is the rule. The issue here is not the technical features of ownership, but rather, the political "autonony" or lack thereof. The real "exception" was Hamilton's national bank, and no one can deny that it was a highly controversial institution, because it was the first major departure from the European practice of giving the private banking community control over monetary policy; critics of the Fed would say that the creation of the Fed was simply a reversion to that policy. --HK 15:16, 1 Jan 2005 (UTC)
- The distinction drawn in the article between "central" and "national" is at best US-only usage, at worst just wrong. A central bank makes monetary policy and is the lender of last resort; it may be public or private and have varying degrees of independence. Take C.E. Walsh, the guru of central bank inflation-targetting: on his website [1] you will not find the phrase "national bank" except as part of the proper name of a bank (eg Swiss National Bank). If you still disagree, please cite some sources. Rd232 16:33, 1 Jan 2005 (UTC)
- I should think that the very concept of a national bank would be anathema to "the guru of central bank inflation-targetting." --HK 16:38, 1 Jan 2005 (UTC)
- I was afraid I'd get that response. Having just had a fight to get natural monopoly conform to the standard definition in economics, I was hoping to correct this article without a battle. I can't find anything useful that relates to the supposed central/national distinction, though I gather it has something to do with historical usage in the US. Please either provide some sources or agree that you'll let me change the article. I don't want to say the distinction as outlined is completely fictional, but it isn't general. If you can show historical US usage in this way, that usage can be described in the article. Rd232 20:51, 1 Jan 2005 (UTC)
- Wrote up an article about the History of the Federal Reserve from Edward Flaherty. It explains that the national banks were private US banks with the right to issue notes that would be accepted by other national banks. There were 100s of those. --J heisenberg 19:20, 3 Jan 2005 (UTC)
- OK. But the right to issue notes is not specific to "national banks", except possibly in that historical context. In other times and places, all sorts of banks could and did issue notes. Rd232 20:50, 3 Jan 2005 (UTC)
- Agreed. National banks fall far short of central banks--I would delete the line or replace it by a comment about independence --J heisenberg 20:59, 3 Jan 2005 (UTC)
- OK. But the right to issue notes is not specific to "national banks", except possibly in that historical context. In other times and places, all sorts of banks could and did issue notes. Rd232 20:50, 3 Jan 2005 (UTC)
- Wrote up an article about the History of the Federal Reserve from Edward Flaherty. It explains that the national banks were private US banks with the right to issue notes that would be accepted by other national banks. There were 100s of those. --J heisenberg 19:20, 3 Jan 2005 (UTC)
- I was afraid I'd get that response. Having just had a fight to get natural monopoly conform to the standard definition in economics, I was hoping to correct this article without a battle. I can't find anything useful that relates to the supposed central/national distinction, though I gather it has something to do with historical usage in the US. Please either provide some sources or agree that you'll let me change the article. I don't want to say the distinction as outlined is completely fictional, but it isn't general. If you can show historical US usage in this way, that usage can be described in the article. Rd232 20:51, 1 Jan 2005 (UTC)
- I should think that the very concept of a national bank would be anathema to "the guru of central bank inflation-targetting." --HK 16:38, 1 Jan 2005 (UTC)
- The distinction drawn in the article between "central" and "national" is at best US-only usage, at worst just wrong. A central bank makes monetary policy and is the lender of last resort; it may be public or private and have varying degrees of independence. Take C.E. Walsh, the guru of central bank inflation-targetting: on his website [1] you will not find the phrase "national bank" except as part of the proper name of a bank (eg Swiss National Bank). If you still disagree, please cite some sources. Rd232 16:33, 1 Jan 2005 (UTC)
- The political autonomy of central banks is more a matter of degrees than a dichotomous issue. Virtually all central banks walk a fine line between autonomy and political influence. The Coyne Affair in the 1950s and 60s provides an illustration. In 1956 James Coyne was appointed governor of the Bank of Canada.. He pursued a tight monetary policy, and this brought him into conflict with the government who was pursuing an expansionary fiscal policy. In 1961 Coyne was forced to resign. The following policy statement was issued by the central bank under the new governor (Louis Rasminsky) : "In the ordinary course of events, the bank has the responsibility for monetary policy, but if the government disapproves of the monetary policy being carried out by the bank it has the right and the responsibility to direct the bank as to the policy which the bank is to carry out. . . .If this policy, as communicated to the bank, is one which the governor feels he cannot in good conscience carry out, his duty is to resign." (Bank of Canada Annual Report of the Governor to the Minister of Finance, 1961). But the government came under heavy political pressure by those who felt too much power was now resting with the government, and by 1967 the Bank of Canada act was amended to delineate the scope and extent of central bank autonomy. This is the framework in which most central banks operate. They are supposed to be independent enough to be immune from the vicissitudes of political whim, yet, at the same time, ultimately responsible to a democratically elected government. Is this fine line a contradiction in terms. . . maybe. But this precarious balance is maintained by counterposing threats. On the one hand, the central bank operates under the threat of government intervention, but on the other hand, governments must live with the political fallout if they do decide to intervene. mydogategodshat 19:23, 1 Jan 2005 (UTC)
- This is the kind of discussion we should have under "independence", instead of the false central/national dichotomy. (I take it mydogategodshat is agreeing with me.) Rd232 20:51, 1 Jan 2005 (UTC)
- I agree with you up to a point. I agree that the issue is too complex to be presented as a dichotomy. A more productive view would be to represent the range of policies as a continuum with "substantial autonomy" and "minimal autonomy" as the two end points. We would find that most central banks would find themselves near the middle of a gaussian distribution. What about the extremes: Are there examples of central banks with no private sector input? . . . probably, and the term "national bank" does seem to fit. Are there examples of central banks with no input from democratically elected officials? . . . probably, although the only one that I can think of that comes close is the Fed. What term do we use for them? mydogategodshat 04:35, 2 Jan 2005 (UTC)
- There is a spectrum of independence for central banks, a term which covers everything being discussed here. If some people use "national bank" to describe part of that spectrum, fine, but I want sources, and a tight definition. The current dichotomy (especially the implication that it is widely accepted in economics) is wrong. Rd232 09:38, 2 Jan 2005 (UTC)
- I have looked through my bookshelves for references to the term "national bank". Of the five financial macroeconomics books there, only one mentions the term. George Kaufman's Money, the Financial system, and the Economy uses the term to differentiate state chartered banks from nationally chartered banks. For example on page 86 he writes, "The Comptroller was established by the National Banking Act of 1863 to charter and supervise the operation of national banks." So I cannot find any evidence to support HK's claim. Unless Hk can find some references, I must agree with you that there is no significant difference between the two terms. However I should point out that my library is populated by economics books: if it consisted of political economy or developmental economics books, the results could be different. mydogategodshat 16:03, 3 Jan 2005 (UTC)
- Part of the confusion could be the result of multiple meanings of the term. To use the term to indicate a member bank of the Fed is quite different from the way it could be used in less developed countries. mydogategodshat 16:17, 3 Jan 2005 (UTC)
- Multiple meanings is part of the problem; though not sure any of them conform to HK's approach. The "central bank" is the official executor of government monetary policy, regardless of name (which may or may not include "National") or ownership or degree of independence. Basta. Rd232 19:12, 3 Jan 2005 (UTC)
- Part of the confusion could be the result of multiple meanings of the term. To use the term to indicate a member bank of the Fed is quite different from the way it could be used in less developed countries. mydogategodshat 16:17, 3 Jan 2005 (UTC)
- I have looked through my bookshelves for references to the term "national bank". Of the five financial macroeconomics books there, only one mentions the term. George Kaufman's Money, the Financial system, and the Economy uses the term to differentiate state chartered banks from nationally chartered banks. For example on page 86 he writes, "The Comptroller was established by the National Banking Act of 1863 to charter and supervise the operation of national banks." So I cannot find any evidence to support HK's claim. Unless Hk can find some references, I must agree with you that there is no significant difference between the two terms. However I should point out that my library is populated by economics books: if it consisted of political economy or developmental economics books, the results could be different. mydogategodshat 16:03, 3 Jan 2005 (UTC)
- There is a spectrum of independence for central banks, a term which covers everything being discussed here. If some people use "national bank" to describe part of that spectrum, fine, but I want sources, and a tight definition. The current dichotomy (especially the implication that it is widely accepted in economics) is wrong. Rd232 09:38, 2 Jan 2005 (UTC)
- I agree with you up to a point. I agree that the issue is too complex to be presented as a dichotomy. A more productive view would be to represent the range of policies as a continuum with "substantial autonomy" and "minimal autonomy" as the two end points. We would find that most central banks would find themselves near the middle of a gaussian distribution. What about the extremes: Are there examples of central banks with no private sector input? . . . probably, and the term "national bank" does seem to fit. Are there examples of central banks with no input from democratically elected officials? . . . probably, although the only one that I can think of that comes close is the Fed. What term do we use for them? mydogategodshat 04:35, 2 Jan 2005 (UTC)
- This is the kind of discussion we should have under "independence", instead of the false central/national dichotomy. (I take it mydogategodshat is agreeing with me.) Rd232 20:51, 1 Jan 2005 (UTC)
- How sad that the discussion is so small, the corporate media is doing it's job very well.Pepitopax 20:59, 15 April 2006 (UTC)
Interest rates
[edit]The article says:
- Marginal Lending Rate (currently 3% in the Eurozone) A fixed rate for institutions to lend money from the CB
Shouldn't this be a rate for institutions to borrow money from the CB? Barrylb 15:23, 3 June 2005 (UTC)
The refinancing rate is not the fed Funds rate in the US. The fed funds rate is the rate that banks charge each other to borrow and lend from their reserves held at the fed —Preceding unsigned comment added by 86.43.151.190 (talk) 11:27, 6 October 2008 (UTC)
Reserve requirements
[edit]I have removed the mention of a "2% deposit requirement in the Eurozone" because I don't believe such a requirement exists. I've also added a bit about capital requirements. My sources for this are searching [2] using terms "deposit requirement" and "bank regulatory requirement" and [3]. I am of course willing to be proved wrong regarding the reserve requirement. The Land 09:30, 20 October 2005 (UTC)
Should it not be mentioned that central banks are believed to be high-scale scams?
[edit]— Preceding unsigned comment added by 65.82.221.141 (talk) 10:35, 15 November 2006 (UTC)
- If you have a reliable source for this (see Wikipedia:Verifiability), then sure. Notinasnaid 10:38, 15 November 2006 (UTC)
- Sources include 'Money as Debt' by Paul Grignon (www.moneyasdebt.net - can be viewed on Google video); 'The Money Masters' (www.themoneymasters.com - website also includes multiple quotes by Presidents of states and banks for reference) - this video can also be viewed on Google video); both pages have multiple related links for references.
- The term 'scam' should be better formalised! I would recommend that the phrase be something like: 'the central banking system unnecessarily appropriates government's money into the hands of private ownership via the issuance of bills' - or other ways of appropriation - for example the gradual transfer of fort knox gold from Government to Federal Reserve - see 'Fort Knox' section on The Money Masters. There is also the secondary side effect to this 'scam' that those who run the central bank (generally not elected democratically) have a disproportionate/dangerous amount of power - and thus can control government decisions (including who should be elected to the board) by threatening ressesion or other monitary chaos (see 'The Money Masters'). —Preceding unsigned comment added by 80.42.172.145 (talk) 17:57, 3 November 2007 (UTC)
- Maybe "scam" isn't the right word, but indeed according to the Austrian school of economics, the practice by central banks of inflating the money supply (about +10% every year in the US - http://research.stlouisfed.org/publications/usfd/page5.pdf), devalues the money, causes disturbance in the economy (boom-bust business cycle theory), is a form of stealth taxation (redistribution of wealth from the creditors to the debtors, and from the creditors to the first receivers of the new money). A very good and short book on the subject is "What has government done to our money?" by Murray N. Rothbard, available for free at http://mises.org/money.asp . I think this is noticeable enough to be mentioned on the article under a new "Criticism" paragraph. —Preceding unsigned comment added by 80.78.0.137 (talk) 14:13, 28 July 2008 (UTC)
- IMO a more important thing is that Austrian School economists are in no way the only people who have a problem with the concept central banks. The problem is, you wouldn't know that from this article's meager Criticism section. In the United States, for example, debates about whether it's good to have a central bank date back all the way to the founding of the nation. 75.76.213.106 (talk) 07:11, 15 April 2010 (UTC)
- To counterballance that I would point out that it seems to be an almost uniquely American obsession. It has almost no traction globally (although I am sure that there are a few small fringe groups who adhere to it). Around the world you will hear people discussing whether the behaviour of various central banks is good or bad but very few would ever argue for not having one at all. Instead you get discussion of issues of their governance, oversight and remit. The fact that some disagree with central banks on a fundamental level should be mentioned briefly in the criticism section but the main thrust of it has to be more mainstream concerns about how central banks operate. --DanielRigal (talk) 08:36, 15 April 2010 (UTC)
- Unfair to characterize as an american obsession - many intelligent people around the world "monetative". are concerned with central banks, Monetative (out of Germany) is a group dedicated to removing the ECB for instance.70.197.0.86 (talk) 08:24, 8 June 2015 (UTC)
- Unfortunately the article doesn't even have a Criticism section anymore. Will some good editor please add one? Evan R. Murphy (talk) 06:06, 19 September 2015 (UTC)
- To counterballance that I would point out that it seems to be an almost uniquely American obsession. It has almost no traction globally (although I am sure that there are a few small fringe groups who adhere to it). Around the world you will hear people discussing whether the behaviour of various central banks is good or bad but very few would ever argue for not having one at all. Instead you get discussion of issues of their governance, oversight and remit. The fact that some disagree with central banks on a fundamental level should be mentioned briefly in the criticism section but the main thrust of it has to be more mainstream concerns about how central banks operate. --DanielRigal (talk) 08:36, 15 April 2010 (UTC)
Capital requirements
[edit]Does anyone know what the following is supposed to mean? "Partly due to concerns about asset inflation and term repurchase agreements, and difficulties in measuring liabilities as accurately as pricing assets, capital requirements are considered more effective than deposit/reserve requirements in preventing indefinite lending: when at the threshold, a bank cannot extend another loan without acquiring further capital on its balance sheet."
This sounds like nonsense to me, but maybe I just don't get it. The usual understanding with banks is that the liabilities are fairly easy to understand (pace strange derivatives, etc); it's the assets that are unclear. I'd edit, but I don't even know what the author is trying to get at.--Gregalton 22:07, 12 December 2006 (UTC)
Documentry
[edit]Some might find this link intresting. http://www.tv-links.co.uk/video/9/6883/10985/68389/95863# 89.16.66.150 04:49, 28 August 2007 (UTC)
Independence
[edit]Why is the section title in scare quotes?
And:
"The main decisions on monetary policy, to name but one example, are made by privately appointed figures independently of any elected political powers. Such is the case with the Monetary Policy Committee of the Bank of England, where the majority power is elected by and given to members of private corporations."
is just a bare-faced lie, isn't it? Wikipedia's own entry on the MPC states that four of the members are appointed by the Chancellor of the Exchequer, and the Governor and Deputy Governors are ... Crown appointments too. —Preceding unsigned comment added by Mk270 (talk • contribs) 17:39, 11 September 2007 (UTC)
... actually, I just got rid of it. Mk270 17:50, 11 September 2007 (UTC)
- "However, while a large volume of economic research has been done to define the relationship between central bank independence and economic performance, the results are ambiguous."
- That needs to cite some actual research. Davidnwelton (talk) 07:19, 14 January 2009 (UTC)
- I think the entire article lacks neutrality, but especially this section. --Fotero (talk) 14:28, 18 February 2009 (UTC)
Independent vs. Private
[edit]A user at Special:Contributions/89.242.29.173 argues that 'independent' and 'private' are the same thing. But this is not correct.
Saying that the central bank is 'independent' means that it is outside of political control by the government. Saying that the central bank is 'private' means that it is legally constituted as a private corporation instead of as a public entity. There is no particular relationship between 'independence' and the central bank's status as a 'private' or 'public' body.
In other words, a central bank can be 'independent' and 'public': that means it is owned by the state, but does not take orders from the current government. Or it can be 'independent' and private: that means it is a private corporation, and does not take orders from the current government. It can also NOT be independent, even if it is private: that means it is a private corporation that obeys orders from the current government. Etcetera.
Neither independence nor the private/public status of the central bank has much impact on the revenues the government earns from the central bank's issuance of currency. If the central bank is public, this (usually) means its revenues go straight into the public treasury and therefore finance public spending. But even when the central bank is officially 'private', like the US Federal Reserve, its profits are (always, as far as I know) taxed at a very high rate (I believe the tax rate is over 90% in the US). Therefore the revenues from issuing currency end up in the public treasury in this case too. --Rinconsoleao (talk) 12:20, 18 July 2008 (UTC)
- If it's not under government control, and not under private corporation control, then who controls it? Somebody has to. Certainly it's under influence by some forces. These forces are most likely from private parties. "Independent" can be a very ambiguous word in this context. --Fotero (talk) 14:26, 18 February 2009 (UTC)
- Independence means that the central bank runs itself. Of course, it must run according to very strict rules, which are defined by the government. But it does not take day-to-day orders from the government: in fact, central banks sometimes make politically unpopular decisions, against the wishes of the government that set them up.
- For example, in the U.S., the laws that govern the Federal Reserve are defined by Congress. In particular, the responsibility of the Federal Reserve, by law, is to maintain low and stable inflation, and low and stable unemployment (I don't remember the exact words of the law, but that's a rough description). The U.S. President, every seven years, appoints the Chairman of the Board of Governors Federal Reserve (most recently, George W. Bush appointed Ben Bernanke). The Chairman (together with the rest of the Board of Governors) controls the decisions of the Federal Reserve.
- So in the US, the simplest answer to your question 'who controls it?', is this: Ben Bernanke controls the Federal Reserve. But he controls it because he was chosen the the President, and he controls it according to rules established by Congress. --Rinconsoleao (talk) 14:49, 18 February 2009 (UTC)
- By the way, I agree that 'independent' is a subtle concept. It's not ambiguous, because economists have discussed what it means for several decades now, but it is subtle, so it might not be clear on first hearing. Here is what the Federal Reserve says about its own independence, on pages 2-3 of its publication Purposes and Functions:
- 'The Federal Reserve System is considered to be an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive branch of government. The System is, however, subject to oversight by the U.S. Congress. The Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government; therefore, the description of the System as “independent within the government” is more accurate.'
- That is one way of summing it up. --Rinconsoleao (talk) 09:49, 19 February 2009 (UTC)
- The word "independence" would seem to be pretty narrowly defined by the fed. It's pretty clear at this point that Greenspan's objectives were anathema to the national interest, but highly consistent with the interests of its owners, who are part of the cartel that own the BIS, IMF and world bank. I think the standard dictionary use of the term would be more informative. By that definition, they aren't independent at all. Furthermore, insider knowledge of policy deliberations presents an irresistable conflict of interest for its owners. This issue needs further elaboration. --Rwinkel (talk) 15:27, 10 April 2011 (UTC)
Money from Debt
[edit]I believe an entire section should be created explaining how a fiat currency is created from debt. Because without debt, there would be no money.
Alby (talk) 22:22, 18 January 2008 (UTC)
- http://video.google.com/videoplay?docid=-9050474362583451279 — Preceding unsigned comment added by Pzyktzle (talk • contribs) 10:27, 28 March 2008 (UTC)
- Actually not necessarily true in general. See: http://www.monetary.org/ — Preceding unsigned comment added by Rwinkel (talk • contribs) 15:29, 10 April 2011 (UTC)
Who owns the money when it is first printed?
[edit]I am sorry if I appear naive, but I am curious to know who owns a nation's currency when it is fresh off the printing press. In Australia, where I am from, the money is owned by the commonwealth of Australia, and is thus publicly owned. The central?/national? bank of a nation as I understand it is the only bank with the authority to print legal tender.
So I guess my question is this: Is it true that in the United States, the Fed is privately owned, printing money that it lends to the U.S. government, which the U.S. government must repay with interest? I guess a similar question would be: who owns the currency of the United States as soon as it comes off the printing press?
Also, is it just me or does it seem almost purposeful the lack of information regarding ownership of the central?/national? banks of nations. ~pzyktzle 10:11, 23 March 2008 (UTC)
- Actually, I am even more confused than I originally thought. I am now unsure if Australia's central bank the Reserve Bank of Australia is publicly or privately owned. The article tells me that the Commonwealth Bank, which used to be our central bank, is now privately owned. But nothing regarding ownership of our current central bank. Is asking if a central bank (actually, more so the money it prints) is privately owned somehow asking the wrong question? ~pzyktzle 10:24, 23 March 2008 (UTC)
- Almost all of the world's central banks are state-owned. Even the one significant case of "private" ownership - the US Federal Reserve Banks - is usually described as 'quasi-public'. Consider this: i) the Board of Governors is a federal agency, full stop; ii) most of the nominal owners (banks) of the Federal Reserve Banks are required to "join" (pay money) and may be required to contribute more in future; iii) they cannot sell their shares, transfer them, gain control, etc (they can only redeem them for the amount contributed); iv) after paying expenses and 6% of the contributed capital (to the nominal shareholders), ALL profits are paid to the US Treasury; v) any "surplus" capital retained cannot be claimed by the nominal owners; vi) Many key operating decisions are either made directly by the Board of Governors or require their consent.
- In other words, the "private" ownership of the FRBs - although technically accurate - is an unusual form of ownership, where the owners get almost none of the normal benefits of ownership (right to profits, in particular). Some would simply say it is not private ownership in any meaningful way. Much of the commentary on the web about what the "private" ownership means is conspiracy theory nonsense.
- The reasons for this are historical: most central banks, going back to the first Swedish central bank (Rijksbank?) were originally private - essentially concessions (like the East India Company) granted by the crown. Same with Bank of England, etc. Countries like Canada first established their central banks as quasi-private like the Federal Reserve, and then later just dropped that idea and made them state-owned. In the US, the "private" owners had much more influence during the Depression (that didn't work out so well), and the FRB system was reformed to limit drastically the influence of the nominal private owners (after the war?).
- As for ownership of money (when printed): it depends on the local system. In the US it is owned by the US Treasury at first, then "sold" to the federal reserve. Once sold by the Fed, it is a liability of the Fed. The Fed only promises to redeem your dollar for another dollar, of course, so it's not a particularly problematic obligation.
- Reserve Bank of Australia is a Commonwealth Authority - i.e. government-owned. See page 12.--Gregalton (talk) 07:28, 24 March 2008 (UTC)
- Thank you for going to a good deal of typing to dish out this knowledge to me. I seem to be running into a hefty amount of "conspiracy theory nonsense" on the web at the moment, but I'm not discounting it yet. I will continue to look further into this, and the Federal Reserve system in particular. ~pzyktzle 06:55, 25 March 2008 (UTC)
- Happy hunting!--Gregalton (talk) 15:29, 25 March 2008 (UTC)
- Thanks for that. I have a couple of questions.
- 1) If the private ownership of the FRBs offers the owners no rights to profits ("ALL profits are paid to the US Treasury") then what is the incentive to own? Especially in light of your points ii) through vi). Additionally, the court ruling in Lewis v. United States, 680 F.2d 1239 (1982) had this to say about the Fed: "Performance of an important governmental function, however, is but a single factor and not determinative in tort claims actions. . . . State taxation has traditionally been viewed as a greater obstacle to an entity's ability to perform federal functions than exposure to judicial process; therefore tax immunity is liberally applied." (See Court Rules Federal Reserve is Privately Owned)
- 2) How can you state with surety that the Fed pays all profits, and is taxed correctly when "From its founding to this day, the Fed has never undergone a complete independent audit. Congress time after time has requested that the Fed voluntarily submit to a complete audit, and every time, it refuses." (Again See Court Rules Federal Reserve is Privately Owned)
- Also, your point i) does not really fully stop anything much I don't think. It is not unheard of to have government agencies work towards the profit of private firms.
- I have looked at a few central banks.
- The Bank of Japan is not state-owned as evidenced by this statement: "In recognition of the fact that currency and monetary control is a component of overall economic policy, the Bank of Japan shall always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government's economic policy shall be mutually harmonious.".
- The South African Reserve Bank "has always been privately owned.".
- The Monetary Authority of Singapore "has been given powers to act as a banker to and financial agent of the Government." strongly suggesting private ownership.
- The European Central Bank is "designed to be independent of political intervention, both from EU institutions and from member states.". This Bank is basically the central bank of ALL countries in the EU.
- So your statement "Almost all of the world's central banks are state-owned. Even the one significant case of "private" ownership - the US Federal Reserve Banks ...." is not as accurate as I first believed. ~pzyktzle 10:29, 28 March 2008 (UTC)
- ) Ownership (that is, becoming a "member bank") is not voluntary for the vast majority of bank-members. They are required to join. (Some can and do join voluntarily, to get access to direct Fed services - sort of like joining a co-op).
- ) Save-a-patriot is not a reliable source. If you read that court decision carefully, it says "not a government agency for purposes of tort laws." Or somesuch. It does not say that the Fed Banks are not government agencies in other senses. (And again, no-one denies that the Fed Banks are legally privately owned - but under a government charter that removes much of the sense of ownership.)
- ) Audit info is nonsense. The Fed is audited, independently, every year - you can find it on their website. It is not subject to full audits by the GAO (by decision of congress), that is the only sense in which it is not audited. (Congress can change that rule at any time). See fed web-site.
- ) Other examples: many Central Banks are nominally independent of government in the sense that they are not under direct ministerial/government operational control - by design. Government can of course change the laws. This has nothing to do with ownership. With the exception of South African Reserve Bank (I'll look into this) I see nothing in the quotes above that contradicts that point: independent within government but owned by government.--Gregalton (talk) 12:21, 28 March 2008 (UTC)
- Two follow-up points: if you read that court decision carefully, it also says FRBs are federal instrumentalities in some respects. The decision is only with respect to Tort laws.
- SA Reserve Bank: you are right, another interesting exception. However, to read the full text: "Since its establishment, the Reserve Bank has always been privately owned. Today the Bank has more than 630 shareholders and its shares are traded on an Over the counter share transfer facility market (OTCSTF market) co-ordinated within the Reserve Bank. Except for the provision of the SA Reserve Bank Act that no individual shareholder may hold more than 10 000 shares of the total number of 2 000 000 issued shares, there is no limitation on shareholding. After allowing for certain provisions, payment of company tax on profits, transfers to reserves and dividend payments of not more than 10 cents per share to shareholders, the surplus of the Bank's earnings is paid to the Government. The Bank's operations are therefore not driven by a profit motive, but by serving the best interests of all the people in South Africa. " (My emphasis. Like the FRBs, shares get a fixed payment.)
- Next: "The SA Reserve Bank Act provides for a Board of directors with 14 members. Among them are the Governor and three deputy governors, who are appointed by the President of the Republic for five-year terms. Three other directors are appointed by the President for a period of three years. ... The remaining seven directors, of whom one represents agriculture, two industry and four commerce or finance, are elected by shareholders for a period of three years. ... The Governor and deputy governors manage the daily affairs of the Bank, as they are the most senior executives with full-time responsibility for the workings of the Bank. The current Governor, Mr TT Mboweni, is only the eighth Governor of the Bank since 1921, and assumed this responsibility on 8 August 1999." Government appoints seven of fourteen directors, four of which are govt appointees who manage daily affairs of the bank.--Gregalton (talk) 12:38, 28 March 2008 (UTC)
- 1 ) I'm not sure I understand. Private ownership of something means that someone puts up personal money to own an asset. I am specifically talking about the private ownership in the Federal Reserve system. Yes to be part of the system you have to pay fees and join, and be subject to a number of government rules. But if, as you say, owners have no rights to profits then I do not understand the point of private ownership, or why people would want to join the system in the first place. Could you illuminate me?
- 2 ) I have read the court decision fairly carefully. It takes into account a number of characteristics of the Fed in order to determine whether or not an employee (Lewis) could sue the Fed as a government agency alleging jurisdiction under the Federal Tort Claims Act. Agreed the website save-a-patriot.org is an unverifid resource, however this court case is all over the internet. It has official looking record numbers supposedly belonging to the UNITED STATES COURT OF APPEALS, NINTH CIRCUIT (No. 80-5905 - 680 F.2d 1239; 1982 U.S. App. LEXIS 20002). It is even referenced in the wikipedia article for the Fed: Federal Reserve System#cite_note-27. I will see if I can get a transcript from the court. The part of interest here is that supposedly, the Fed is tax exempt/immune.
- 3 ) If the audit information is nonsense then I shouldn't find anything relating to calls by congress for submitting to a complete audit. Will look for them. In the meantime could you explain what the difference is between the independent audits the fed undergoes every year and the "full audits by the GAO"?
- 4 ) I see a massive contradiction in using the term state-owned for banks that are independent of any control by the state. If the Bank of Japan can completely disregard the will of the Government of Japan, I would not consider it state-owned as "ownership" inherently implies a degree of control of something. To me, "independent within government but owned by government" is itself a contradiction as independence is effectively the removal of ownership in any meaningful sense. They could be "state-funded" and independent, a very big distinction. As for the European Central Bank, I can't quite fathom how you could see no contradiction in claiming that it is state-owned.
- Thank you very much for your patience. ~pzyktzle 04:27, 29 March 2008 (UTC)
- ) For the Fed system, most members are required to be members - i.e. national banks. Others join because it provides them direct access to certain Fed Bank services (clearing, payment systems, discount window? I don't recall all the details, but it's on the Fed's websites) and probably is a bit prestigious. I can't comment on South Africa. But your question is on point: the reasons they join the Fed system are not like the usual ownership motivations.
- ) Fed is free from tax because ... basically because it's government. My point about the websites claims is that it is not deciding whether or not the Fed is private or a government agency, but whether it is a government agency for the purposes of tort, because there are special rules regarding tort for government - but they do not apply to all government agencies.
- ) GAO does a different type of audit. Mainly about policy effectiveness, not about theft and the like. Congress can change this rule if it so wishes, but (so far) has not done so to retain policy independence from Congress and the executive - that is, direct policy: Congress sets general directions and leaves Fed to implement. One can debate whether the audit is sufficient, the right kind, etc., but to say there is no independent audit is just a fabrication.
- ) Few central banks are independent of "any" control. They are (generally) independent of direct control. So are judges, so are some other structures. Look at article on the Bank of Canada for an example: government appoints governors, but tradition holds that direct interference would "require" the Governor to resign. The specifics differ in each country, but they are generally neither (fully) independent nor directly under government control - by design. This is to insulate central banks from being directly manipulated from government (to influence, for example, electoral cycles), or, if you prefer, to insulate government from having to make unpleasant decisions.
- I'm not sure I understand your point about ECB.--Gregalton (talk) 14:34, 29 March 2008 (UTC)
- 1 ) So from you answer, I can deduce that private enterprise joins the Fed system (costing money and a ton of paperwork, subject to lots of government regulations) so that can access clearing systems, a discount window and gaining prestige, all the while not being able to make any profit out of this business. Is that right?
- 2 ) If the Fed is free from tax then we should probably go and clean up this article where in the introduction it says that "U.S. Federal Reserve ... almost all profits of the bank are paid to the government as tax.". As for the court ruling, yes I know. So does this mean you now consider this particular resource reliable?
- 3 ) OK. I find it incredibly hard to believe the Fed is not audited. Who are the independent auditors of the Fed? Could you list one?
- 4 ) Right. So the independence is not black and white and there actually is a degree of control by the government over independent state-owned banks (however tiny it might actually be). I can live with calling them state-owned if that is the case. As for the ECB, to illustrate my point I'll ask you "which state owns it"? Obviously no single state. Thus the term "State-owned" would have to be vastly redefined in scope to use it to describe the ECB. Thus I couldn't see why you would not see a problem calling it state-owned. Unless of course we now define the EU as a state.
- Synopsis: The whole purpose of my inquiry was to find out if governments control their money supply, in the traditional state-owned way. I have found that most richer countries, including Australia, have adopted an "independent" structure. The purported purpose is to "prevent political interference". Thus they do not own their own money supply, they can only assert political influence on these (mostly) independent entities. What I seem to be finding is that governments hold accounts with these central banks. From here things get very confused. Most places I look say that the governments borrow money at interest from these institutions. Which is straightforward enough and explains government debt to a large degree. Is this the general model? ~pzyktzle 05:57, 30 March 2008 (UTC)
- Again, most Fed member banks are required to join. They have no choice. They get paid a fixed 6% on their share capital (a tiny fraction of the profits). This is seen as compensation for reserve deposits (on which they are paid no interest).
- Fixed that sentence in the article. No, I do not find the resource reliable, primarily because what is represented as a court decision that says "X" says no such thing.
- KPMG. See [4]. Lots of information on their website.
- EU is owned by national central banks of Euro area. So yes, not owned by a specific state directly. In this context, "state-owned" is a term used to refer to government-owned. (Hong Kong is formally not a state, but does have a separate central bank).
- I disagree completely with your synopsis. The question of who "owns" the money supply does not make sense. It would probably be a lot more instructive to consult the sites of the central banks or other reputable sources.
- Governments can completely control their central banks and money supply; they frequently choose not to control them directly. Governments do not pay interest to central banks, central banks remit interest earned on currency issued. (Or, if you prefer, governments pay interest to central banks but then get that interest back). Bank issues currency to me; bank buys govt bonds with the money I paid; I get no interest; central bank does; at end of year, govt gets the interest it paid to central bank back. Since the value of the currency I hold has (probably) fallen in value, government has made money from seigniorage.--Gregalton (talk) 07:29, 30 March 2008 (UTC)
- 1 ) Sorry, but *still* confused. You are saying that private enterprise is forced to join this system ("has no choice")?
- 2 ) I should have been more clear on what I meant by the resource. I meant the actual court ruling itself, not the website. I see exactly what you mean, the Fed has been ruled private for purpose Y. I will also point out that I could also turn around to you and say that the resource you gave me to prove that the Reserve Bank of Australia is a Commonwealth Authority states that "The Reserve Bank (of Australia) is a Commonwealth authority for the *purposes of* the Commonwealth Authorities and Companies Act 1997" page 12. However, I wasn't using the court ruling to point out that the "Fed is privately owned", but that it is tax exempt. Something we both agree on and you have helped rectify the article because of this. (Edit: I have noticed you have still left that the Fed is taxed. Why? Also, what does "other formal arrangements" mean?
- 3 ) Cheers. Will look into KPMG's audit(s) of the Fed.
- 4 ) We now agree (I think) that we can call an independent central bank that can be influenced by the government state-owned. How much influence is another matter. If the amount of influence is minimal to the degree that the bank can do whatever it wants when there is a genuine need from the government, again I would contest the use of the term state-owned. I think Hong Kong is a bad analogy as it is effectively a state run pretty much autonomously from China. The EU I would not consider having anywhere near the same state-like characteristics as Hong Kong. After looking around I am finding the ECB even more interesting than the Fed.
- I have consulted the websites of central banks. As I said, it is very confusing. It almost seems as if they go out of their way not to explain *clearly* the process of how government and the central bank work together. (A bit like saying vaguely: "other formal arrangements" ;) A lot of them do not mention that the government has a bank account with them. Yet on the news I have heard in Australia statements along the lines of the government borrowing money from the central bank. Naturally I then ask, why are you borrowing your own money if it is yours? Why does the question of who "owns" the money supply not make sense? You have already told me that on printing US money it is "owned by the US Treasury at first, then "sold" to the federal reserve". My synopsis was of the direction of my questioning, and not anything I was claiming as fact. Please do disagree and point me in the right direction knowledgable sir. ~pzyktzle 12:35, 30 March 2008 (UTC)
- See [5]. "National banks chartered by the federal government are, by law, members of the Federal Reserve System. State-chartered banks may choose to become members of the Federal Reserve System if they meet the standards set by the Board of Governors. Each member bank is required to subscribe to stock in its regional Federal Reserve Bank, but holding Federal Reserve stock is not like holding publicly traded stock. Reserve Bank stock cannot be sold, traded, or pledged as collateral for loans. As specified by law, member banks receive a six percent annual dividend on their Federal Reserve Bank stock;" Yes, national banks are required to contribute capital to the Fed system.
- State-owned: my point was that the term state-owned is used loosely to mean government owned. It does not imply state in either the U.S. or international sense of "statehood."
- Must go and do other stuff now.--Gregalton (talk) 13:36, 30 March 2008 (UTC)
On your notes above:
- 2) Money is simply transferred to the govt. Bank of Canada simply says "transferred to govt." Fed says "Payments to U.S. Treasury as interest on Federal Reserve notes." So the Fed issues notes (currency), and buys interest-bearing assets - typically government bonds. Then it gives the interest earned back to the government. Different places refer to it differently, it amounts to the same thing: cash money is an interest-free loan to the government, which central banks usually invest in interest-earning assets.
- 4) Degree of influence. The government can do whatever it wants, if it changes the laws. Govt designed the system to stop itself from doing (excessively) stupid stuff with monetary policy. Central banks everywhere balance their independence against knowledge that the system needs some type of legitimacy, or government will change it (as has been done in the past, numerous times). This is usually true of quasi-independent govt agencies.
- "Government borrowing from central bank": in a normal operation (where no net new money is put into circulation) a central bank can trade government debt (bonds) for cash from the central bank; government spends the money (paying bills/salaries), putting money into circulation); the central bank then exchanges (sells) the bonds for cash, taking that money back out of circulation. This is functionally the same as government selling the bonds directly to the public (the market) for cash - so normally even if governments "borrow" from central banks, they are really borrowing from the market.
- The reasons to do it this way (instead of having an auction of the bonds) are largely technical/operational - depending on the local environment, and I don't know the details about Australia - if you look at reports of Bank of Canada, the BoC is fiscal agent for the government. It manages all cash accounts, debt, and foreign exchange reserves.
- None of this implies a change of ownership of the central bank from state-owned.--Gregalton (talk) 16:09, 30 March 2008 (UTC)
"who owns the currency of the United States as soon as it comes off the printing press?"
- This is a very good question. The poster is correct in that the U.S. Treasury owns this newly-printed money for an insignificant period of time. He/she is also correct in that the U.S. Treasury "sells" the newly-printed money to the privately-owned Federal Reserve for essentially the cost of printing the paper money. The Federal Reserve is then free to loan this money to the U.S. Government with interest, which it earns. After that occurs, I am not sure what happens to the profits. Following the flow of this money is a worthwhile endeavor. — Preceding unsigned comment added by Irishmate (talk • contribs) 19:49, 2 May 2008 (UTC)
- You are definatly correct in saying so.There are one or two families in the country that control the amount of money that gets printed and they, lend it to the government, whom then have to pey it back with interest.
- the same thing happens in South Africa, where i am from. — Preceding unsigned comment added by 41.245.185.103 (talk) 12:33, 20 July 2008 (UTC)
Hi Gregalton, could I ask a question now? lol, sorry. When the central bank sells the bonds to the "market", what typical examples can you give of this? I ask because the capital of "the market" is owned by disproportionately few hands (correct me if I'm wrong), e.g. minority shareholders. When the central bank sells the bonds, where does this debt end up and in what form? Thanks! (194.221.40.3 (talk) 16:31, 20 November 2008 (UTC))
Use of Central Bank money to pay Country obligations
[edit]I would like to see a clarification about using Central Bank money to pay countries obligations. For example in Argentina the government is using part of the reserves to pay part of the country debt (formally I think this must be approved by the congress). How is the situation in other countries? —Preceding unsigned comment added by 190.16.236.74 (talk) 05:00, 14 October 2008 (UTC)
This statement should be referenced or removed
[edit]"In practice, there is little difference between public and private ownership, since in the latter case almost all profits of the bank are paid to the government either as a tax or a transfer to the government." - I certainly haven't found proof of this anywhere. Can anyone shed any light on this?? (194.221.40.3 (talk) 13:13, 26 November 2008 (UTC))
- I wrote that. What I meant is that the U.S. Federal Reserve, formally, is a private corporation. However, it is a private corporation with strong oversight by Congress, that effectively acts as if it were an independent branch of government. And it pays almost all its earnings as taxes. Here is what the Federal Reserve says on page 11 of its publication Purposes and Functions:
- 'After it pays its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury. About 95 percent of the Reserve Banks’ net earnings have been paid into the Treasury since the Federal Reserve System began operations in 1914. (Income and expenses of the Federal Reserve Banks from 1914 to the present are included in the Annual Report of the Board of Governors.) In 2003, the Federal Reserve paid approximately $22 billion to the Treasury.'
- So that's what I meant. Even central banks that are, technically speaking, private corporations, effectively turn over everything they earn to the government. So from a fiscal standpoint, there is little difference between public and private ownership. (Maybe there is some country in the world that has a private central bank which does not pay most of its income to the government as taxes-- but I'm not aware of one.) --Rinconsoleao (talk) 10:28, 19 February 2009 (UTC)
- Also, the Wiki article now says the Fed is 'quasi-public'. I assume what that means is that the Fed is, technically speaking, a private corporation, but that for all practical purposes it acts like a public institution (i.e., like a branch of government). --Rinconsoleao (talk) 10:30, 19 February 2009 (UTC)
Is the central bank the ultimate authority for how much other banks have (non-printed) money?
[edit]Hi,
There's one thing I guess I'd like explained somewhere, but I don't even know if I understand the issues correctly.
As far as I understand, not all e.g. dollar-denominated money exists as bank notes, but a majority of it in some kind of digital form. I guess this corresponds in a sense to an individual having dollars deposited on some bank.
Do individual banks then have such accounts in the central bank? Or, what actually defines the amount of money a certain bank has? If a bank A wants to transfer money to bank B, how does the actual transfer happen if not in bank notes? Is it done by bank A announcing a transfer to the central bank, which updates the authoritative record of how much digital money those banks have?
If it works something like this, does it also mean that a government can by decree confiscate or freeze all digital dollars from some "rogue country" (who e.g. doesn't want to pay its debts)? Doesn't the amount of dollars owned by foreign central banks exceed the amount of notes in circulation?
I seem to remember that there used to be large (e.g. $100k or $1M or £1M) banknotes for such use. I guess that's no longer true? --SLi (talk) 20:54, 4 January 2009 (UTC)
Central_bank#Interest_rates should have its own article
[edit]It's very important, it's constantly being talked in the news and I bet most people have no idea how it works unless they've got a degree in economics while it affects their lives immensely. --AaThinker (talk) 13:17, 5 April 2009 (UTC)
The Swedish Riksbank is the oldest centralbank in the world but...
[edit]also the bank arose from the bank "Stockholm Banco" which was Swedens oldest bank and the first European bank that printed money. Perhaps this is should be in the text? —Preceding unsigned comment added by 194.103.203.254 (talk) 09:06, 26 March 2010 (UTC)
Cuba
[edit]I am not sure what this is trying to say: "The situation in Cuba is so exceptional as to require the Cuban peso to be dealt with simply as an exception, since the United States forbids direct trade with Cuba. US dollars were ubiquitous in Cuba's economy after its legalization in 1991, but were officially removed from circulation in 2004 and replaced by the convertible peso." -- Beardo (talk) 15:25, 26 April 2010 (UTC)
Could we have a source for this?
[edit]Even when targeting interest rates, most central banks have limited ability to influence the rates actually paid by private individuals and companies. In the most famous case of policy failure, George Soros arbitraged the pound sterling's relationship to the ECU and (after making $2 billion himself and forcing the UK to spend over $8bn defending the pound) forced it to abandon its policy. Since then he has been a harsh critic of clumsy bank policies and argued that no one should be able to do what he did.
Does anybody have a credible source that Soros said this, or are we just taking his word on it? --Kluutak (talk) 18:51, 22 April 2011 (UTC)
- Yes, the first sentence is very badly phrased or nonsensical, and conflicts with the accurate prior paragraph. Central banks & governments can completely control the interest rates on their own debt. They just can't do this & control exchange rates too. The basic, risk-free rates they pay are different from and lower than "the rates actually paid by private individuals and companies" which of course are less within their control, unless the government & central bank engage in direct lending to private individuals and companies. But this has nothing to do with exchange rates or control over basic domestic risk-free rates, or this section, so I just removed the offending first sentence. I think the rest of the para about Soros is accurate.John Z (talk) 01:07, 24 June 2012 (UTC)111
- Kluutak , I guess John Z's long winded answer was "no" ! --Wuerzele (talk) 14:55, 1 October 2015 (UTC)
African Central Bank
[edit]why not mention it in the article? 188.2.172.171 (talk) 18:12, 12 July 2011 (UTC)
Further Reading resource
[edit]http://www.foreignpolicy.com/articles/2011/11/28/the_global_thinkers_20_most_recommended_books?page=0,0 The Global Thinkers' Book Club; Want to think like the world's best minds? Start by reading like them. The Foreign Policy Global Thinkers' 20 most recommended titles. NOVEMBER 28, 2011
1. Lords of Finance: The Bankers Who Broke the World (2009) by Liaquat Ahamed. Recommended by Nancy Birdsall, Deepa Narayan, and Paul Ryan.
Excerpt ...
Liaquat Ahamed profiles the four central bankers -- in Britain, France, Germany, and the United States -- who sought to reconstruct the global financial system after World War I. His findings, however, are not purely historical: "As I write this in October 2008, the world is in the middle of one such panic -- the most severe for seventy-five years, since the bank runs of 1931-1933 that feature so prominently in the last few chapters of this book.… Watching the world's central bankers and finance officials grappling with the current situation -- trying one thing after another to restore confidence, throwing everything they can at the problem, coping daily with the unexpected and startling shifts in market sentiment -- reinforces the lesson that there is no magic bullet or simple formula for dealing with financial panics. In trying to calm anxious investors and soothe skittish markets, central bankers are called upon to wrestle with some of the most elemental and unpredictable forces of mass psychology. It is the skill that they display in navigating these storms through uncharted waters that ultimately makes or breaks their reputation."
99.19.42.30 (talk) 08:05, 4 December 2011 (UTC)
Size of balance sheet?
[edit]As of December 2011, the U.S. Federal Reserve Bank has a $2.8 trillion balance sheet (assets/liabilities) against $50 billion in capital. This makes the bank leveraged 56 to 1. Has a central bank ever been leveraged to this degree? — Preceding unsigned comment added by 63.150.169.180 (talk) 05:09, 14 December 2011 (UTC)
I'm not sure about leverage ratios, but the Bank of Japan has historically had a large balance sheet with a high GDP-to-holdings ratio. Regardless, leverage isn't a relevant number for a central bank. Central banks have monetary authority, so in the words of the ECB they can "operate at negative equity." They can create money whenever they wish, so there is no chance of a central bank going bankrupt.
The "capitalization" of the central bank is mostly there for their image. If you're a central bank and you have negative equity and are printing money to pay your obligations, it makes you look like a bad steward of the currency. — Preceding unsigned comment added by 2601:141:301:E97C:5109:49FB:E8E8:DED1 (talk) 13:37, 7 April 2016 (UTC)
Is there any country today that has a central bank not creating interest-bearing debt-money?
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Or are all such institutions create money as debt to be repaid at interest..?--Namaste@? 19:11, 8 January 2012 (UTC) |
Countries without a central bank
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also monaco and Andora.(but these are tax havens for the super rich) All you conspiracy buffs, I bet you can see a connection --Namaste@? 05:43, 29 August 2012 (UTC) |
Implementation of main interest rate
[edit]First time here on wiki:
these paragraphs in the text are 100% accurate,imo:
- By far the most visible and obvious power of many modern central banks is to influence market interest rates; contrary to popular belief, they rarely "set" rates to a fixed number. Although the mechanism differs from country to country, most use a similar mechanism based on a central bank's ability to create as much fiat money as required.
- The mechanism to move the market towards a 'target rate' (whichever specific rate is used) is generally to lend money or borrow money in theoretically unlimited quantities, until the targeted market rate is sufficiently close to the target. Central banks may do so by lending money to and borrowing money from (taking deposits from) a limited number of qualified banks, or by purchasing and selling bonds. As an example of how this functions, the Bank of Canada sets a target overnight rate, and a band of plus or minus 0.25%. Qualified banks borrow from each other within this band, but never above or below, because the central bank will always lend to them at the top of the band, and take deposits at the bottom of the band; in principle, the capacity to borrow and lend at the extremes of the band are unlimited.[10] Other central banks use similar mechanisms.
The ECB, f.e., has a fixed rate for its "Main refinancing operations" (as you can see here http://www.ecb.int/stats/monetary/rates/html/index.en.html) This rate is truly fixed, it is not a variable tender rate as it was in the past. More info can be found here:
- The Eurosystem may execute its tenders in the form of fixed rate or variable rate tenders. In the former, the ECB specifies the interest rate in advance and participating counterparties bid, the amount of money they wish to transact at the fixed interest rate. In the latter, counterparties bid both the amount of money they wish to transact and the interest rate at which they wish to enter into the transaction. Counterparties may submit multiple bids with different interest rate levels. In each bid, they must state the mount of money that they are willing to transact at the respective interest rate. The Governing Council may set a minimum bid rate for variable rate tenders in order to signal the monetary policy stance. Under both tender procedures, the ECB decides the amount of liquidity to be provided. In a fixed rate tender, this normally implies a pro rata allotment to the participating banks, depending on the ratio between total bids and total liquidity to be allotted. In a variable rate tender, the bids with the highest interest rates are satisfied first, followed by bids with successively lower rates, until the total amount of liquidity to be provided is exhausted. At the lowest accepted rate, the “marginal rate of allotment”, bids are satisfied pro rata in line with the ECB’s decision on the total amount of liquidity to be allotted. For each individual allotment, the interest rate is equal to the interest rate bid. In exceptional circumstances, the ECB may decide to allot all the liquidity requested by counterparties, i.e. to accommodate all bids in full. This full allotment procedure was introduced during the period of acute financial market tensions which began in 2007.
http://www.ecb.int/pub/pdf/other/monetarypolicy2011en.pdf?707986c2746234cac7c14158ae98c125 — Preceding unsigned comment added by HugeLorry (talk • contribs) 18:35, 13 July 2013 (UTC)
Not usually state owned?
[edit]I decided to be bold and remove this sentence from the article because I believe it to be too ambiguous: "In most cases they are not public, in the sense that they are neither state-owned nor directly regulated by government, parliament or another elected body."
While almost all central banks are structured to have independence from the government, most of them are state-owned. The US Federal Reserve is an interesting exception, having a system of member banks although not "ownership" as we would normally understand it (the full explanation is given elsewhere on this talk page). Most central banks are owned by their national government yet have an independent board, leading to the confusion. The phrase "directly regulated" is also confusing - most countries subject their central banks to standard audit procedures, even though they can act independently. — Preceding unsigned comment added by 59.167.122.159 (talk) 12:41, 5 February 2014 (UTC)
Dr. Dai's comment on this article
[edit]Dr. Dai has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:
1) "Evolving further partly in response to the European Central Bank, the People's Bank of China had by 2000 become a modern central bank. The most recent bank model was introduced together with the euro, and involves coordination of the European national banks, which continue to manage their respective economies separately in all respects other than currency exchange and base interest rates."
to be modified as "The People's Bank of China had by 2000 become a modern central bank. The European Central Bank is the most recent bank model that was introduced together with the euro and involves coordination of the European national banks, which continue to manage their respective economies separately in all respects other than currency exchange and base interest rates."
2) "Central banks create money by issuing interest-free currency notes and selling them to the public (government) in exchange for interest-bearing assets such as government bonds" to be changed as "Central banks create money by issuing reserves that are kept by commercial banks at the central bank and interest-free currency notes in exchange for interest-bearing assets such as government bonds"
3) "To enable open market operations, a central bank must hold foreign exchange reserves (usually in the form of government bonds) and official gold reserves. " to be changed as "To enable open market operations, a central bank must hold national government bonds, foreign exchange reserves (usually in the form of foreign government bonds) and official gold reserves. "
4) "Liu explains further that "the U.S. central-bank lending rate is known as the Fed funds rate." " to be modified as "The U.S. central-bank lending rate is known as the Fed funds rate." The citation of Liu here is not pertinent since this is a common knowledge.
5) "... a fiat money system set by command of the central bank" is to be suppressed.
6) "the rates parties receive for deposits at the central bank" to be changed as "the rates commercial banks receive for deposits at the central bank"
7) "make up the monetary base, called M1, M2 and M3" to be changed as "make up the monetary aggregates, called M1, M2 and M3"
8) "ECU and (after making $2 billion himself and forcing the UK to spend over $8bn defending the pound) forced it to abandon its policy" to be changed to
"ECU and (after making $2 billion himself and forcing the UK to spend over $8bn defending the pound) forced the UK to withdraw the pound sterling from the European Exchange Rate Mechanism (ERM)"
9) "critic of clumsy bank policies" to be changed to "critic of clumsy central bank policies"
We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.
Dr. Dai has published scholarly research which seems to be relevant to this Wikipedia article:
- Reference : Meixing Dai, 2012. "Static and Dynamic Effects of Central Bank Transparency," Working Papers of BETA 2012-08, Bureau d'Economie Theorique et Appliquee, UDS, Strasbourg.
ExpertIdeasBot (talk) 18:29, 27 June 2016 (UTC)
trying to find information about release by German banks, of Paul von Hindenburg 2 Reichs mark, dated 1938,
[edit]The silver coin has been gold plated, and made into a pendant, it has the head of Paul von Hindenburg, with 1847- 1934, the reverse has the Eagle with the position of the swastika indented out, the gold plate has been applied after the indentation. it has Deutsches Reich 1938, plus 2 Reich's mark. the rim inscribe with, Gemeinnutz Geht Vor Eigennutz, in English( Common Good Before Self), I understand some German banks issued them after the second world wall. Where they celebrating the end of Nazi Germany, any information would be welcome. — Preceding unsigned comment added by 92.14.57.154 (talk) 09:52, 2 June 2018 (UTC)
A Commons file used on this page or its Wikidata item has been nominated for deletion
[edit]The following Wikimedia Commons file used on this page or its Wikidata item has been nominated for deletion:
Participate in the deletion discussion at the nomination page. —Community Tech bot (talk) 18:06, 9 November 2020 (UTC)
Overlap with monetary policy
[edit]I think this page has too much emphasis and overlap with monetary policy. I would propose the following re-arrangements:
- The "central bank" entry should offer an overview of central banks's history, governance, activities (ie. monetary policy : supervision, coins and notes issuances etc.).
- the monetary policy page should be more detailed about central banks's price stability objectives and tools. Currently it's the opposite.
So i would transfer the sections on policy instruments to monetary policy and restructure the central bank page to give more prominence to central banks governance and other activities.
Any remarks / objections to this approach? — Preceding unsigned comment added by Stanjourdan (talk • contribs) 14:32, 12 December 2020 (UTC)
I agree in principle to deflate article for points better placed under Monetary Policy. is this still ongoing? Oppa gangnam psy (talk) 19:59, 2 May 2022 (UTC)
Inputs needed - improved rewrite of "early history" of money
[edit]Central bank#Early history starts off with mishmash attempts to explain how money began - its explanation and genesis feels amorphous, and worse it's supported by a dead link. We propose lifting a few words from one JSTOR article for a definite date money began. See blockquotes below, inputs / suggestions / alternatives welcome. Thanks in advance and a few more points:
(1) We can dispense with 2nd edit re: "Gold 1400BC" and leave "Egyptian shat" but that leaves open the dead link for more challenges down the road. Proposal to substitute with "Gold 1400BC" clears this headache for good in favor of just once source. Caveat though that finding "gold shat" is really obscure for reinforcements with WP:RS.
(2) Final sentence not touched, out-of-scope here for now but can be proposed later.
(3) Propose no changes notwithstanding the concerns - the proverbial the enemy being the enemy of the good?
The use of money as a unit of account predates history.Establishing the origins of commodity money requires written records on which historical commodities served the various functions of money. In ancient Mesopotamia silver and barley were known to have served as basic monies from 2500 BC or earlier, with their monetary uses well-attested to in documents of nearly all periods and areas.[1]: 227Government control of money is documented in the ancient Egyptian economy (2750–2150 BCE).[2] The Egyptians measured the value of goods with a central unit called shat. Like many other currencies, the shat was linked to gold. The value of a shat in terms of goods was defined by government administrations.Gold's monetary use was limited by its rarity, and served more as commodity than money before c 1400 BC.[1]: 230 Other cultures in Asia Minor later materialized their currencies in the form of gold and silver coins.[3]
Oppa gangnam psy (talk) 21:26, 2 May 2022 (UTC)
References
- ^ a b Powell (1996). Money in Mesopotamia. Journal of the Economic and Social History of the Orient, 1996, Vol. 39, No. 3, pp. 224-242. https://www.jstor.org/stable/2601227
- ^ Monetary Practices in Ancient Egypt. Money Museum National Bank of Belgium, 31 May 2012. Retrieved 10 February 2017.
- ^ Metcalf, William E. The Oxford Handbook of Greek and Roman Coinage, Oxford: Oxford University Press, 2016, pp. 43–44
There should be a section on who RUNS all the worlds central banks
[edit]Because you are all ignoring the (((800 pound gorilla))) in the room 2601:881:81:4040:0:0:0:F4EE (talk) 20:22, 2 September 2022 (UTC)
Wiki Education assignment: Research Process and Methodology - SU24 - Sect 200 - Thu
[edit] This article is currently the subject of a Wiki Education Foundation-supported course assignment, between 22 May 2024 and 24 August 2024. Further details are available on the course page. Student editor(s): Garnix L (article contribs).
— Assignment last updated by Zq2197 (talk) 04:29, 17 August 2024 (UTC)
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