Learning Journal Tasks Of Central Bank

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Learning Journal Tasks

Central Bank is in charged with the country’s money supply, provides price stability, attaining economic output and employment goals, regulate commercial banks, stabilizing the macroeconomy by acting as the “lender of the last resort” during financial crisis and provide payment system such as check clearinghouses and long-distance payments. The U.S. Central Bank have been around since 1791. The first central bank was called the B.U.S. (Bank of United States). A chronological outline of brief history of the U.S. central banking system.

In 1791 - BUS, first central Bank of the United States. Mitigated the Financial Panic in 1792. US ran into financial deficit in funding the War of 1812 aka the second war for independence, BUS became obsolete urging the government to form a new central bank.

1816 - SBUS (second Bank of United States) was established. This bank had some agency problems and failed to prevent recession and debt deflation. Consequently, Andrew Jackson vetoed to renew the SBUS existence and eventually bankrupt.

1837 - 1914: U.S did not have a central bank. Gold and silver were the monetary base and having a fixed rate, an advantage to having a self-equilibrium effect to the market. Thus, the inflows and outflows of gold and silver are according to the market needs hence, no need for a central bank. In terms of foreign currency, the exchange rate is based on dollarization, a process where countries outsource their monetary policy
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