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WEEK 1: Introduction to Money

ECON 310, WEEK 1
by

Scott Burns

on 7 September 2016

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Transcript of WEEK 1: Introduction to Money

Puzzle: Why is M&B so hard to understand?
III. Overview of Financial Market
II. What is Banking?
Review
Questions for Future Discussion
ECON 310
Money and Banking
Professor: Scott Burns
Topics of a Bureaucratic Nature
Attendance: class is
optional
(consequences ain't)

Discussion-based lectures with In-class bonus
General Etiquette
Snow Days
Email
Asking Questions
Why really Study Money?
3 Words:
5 Words:
Real Talk
Once you learn, you'll become a lifelong student
WEEK 1: An Introduction to Money
Q: Are we moving towards a bankless world or a cashless world with e-money and things like bitcoin? If so, is that a good thing?
III. Spontaneous Order

Q: What are the dangers of having a central bank monopoly?
Q: Should governments ban alternative currencies like bitcoin?
Readings: FM ch. 1-3
H. Hazlitt: "Economics is haunted by more fallacies than any other study known to man." - EOL p. 15
What is the
defining
characteristic of Money?
a. Unit of Account
b. Commonly Accepted Medium of Exchange
c. Store of Value
d. All of the above
"Result of human action, NOT human design"
Burns: "Monetary economics is haunted by more fallacies than any other subfield in economics" (now)
More money, more problems?
Developing a better understanding of how our money and banking system works will help you understand:
What causes recessions and depressions
Where inflation comes from
What newspaper headlines mean when they say the Fed "lowered" or "raised" interest rates
Understand some logic of investing
What is Bitcoin?
Q: What do YOU want to learn about?
Why study money now?
Q: Why should you care about M&B?
A: It affects our everyday lives
Teaser: The Fed didn't necessarily create the wildfire that spread into the housing and student debt bubble entirely on its own, but it sure as hell provided the fuel and the spark.

RECALL: Toxic Mason Pond
I. What is Money?
Financial Markets (def)


Which of the following are essential functions of banks?
a. Accept deposits
b. Make loans
c. Store money as a money warehouse
d. A and B only
Which of the following is NOT one of the three types of financial markets?
a. Banks
b. Betting Markets
c. Bond Markets
d. Stock Markets
Q: What is the best way to bind the hands of central bankers?
Money (def)
3 Ideal Characteristics
Key feature:
indirect exchange
2 Defining Features:
Loanable Funds Market
Financial Intermediation
Q: What good do banks do?
III. Spontaneous Order

"Result of human action, NOT human design"
Q: Do banks actively contribute to economic growth? Or are they just blood-sucking, money-leeching middlemen who steal our $?
Q: What are
Central
Banks?
III. Spontaneous Order

"Result of human action, NOT human design"
Q: What are central banks (CBs)? How are they different from ordinary banks?
3 Types of Fin. Markets:

Interest Rates
Inflation
Business Cycles
Financial Crises
IV. Money, Banking & Macroeconomics
Reduce Transaction Costs
Asymmetric Info
Specialized Knowledge of Investment Opportunities
Offer financial products that enable us to diversify risk
Adverse Selection
Moral Hazard
Q: How do markets weed out racism?
Full transcript