Prophylaxis of insurance money

Brief History
Developed by the insurance benefits are not guaranteed the money that the purpose of insurance coverage for the division, with the exception of the money in a safe or money in small amounts. The need for protection of workers 'wages' are taken from a branch of the bank account of employees or wages in lieu of business has increased.

Originally, the purpose of insurance is limited to the wages of workers who are not yet stored in a storage company. The more the meaning of money in monetary growth insurance is not limited to the wages of workers who saved the employer's business, but the money of the workers are not paid by the employer to the employee, such as building rent, salaries or distributed by the employer to employees who reside elsewhere. The danger is guaranteed at that time already covers the loss of losing money due to theft, robbery or accident. Security can be extended to the dishonesty of employees and the employer must pay the money.

Given the risk of losing money is not just happen out of the building and the building as a bank or other, then the security is often a warning to employers to strengthen its cash flows to observe the movement and location of the employer work. Especially if the money was transferred much under control.

What can be insured?
metal or the equivalent in cash and securities, the elimination of such activities.

What Is Covered?
Insurance cover loss of money for something (in terms of cash, traveler's checks, money orders, precious metals, bonds, and others) that occur as a result of theft, loss, destruction or misappropriation of funds, and damage during transport or storage in a store cashier and / or frame.

All risks are not covered?
The risks are not covered, among others: the lack of money due to a miscalculation by the finance and accounting, losses outside of these areas in the political declaration, war, riots and similar assets, depreciation , radioactive contamination, nuclear weapons.

Anyone who needs this product?
Companies or individuals engaged in large quantities and regularly. Examples: banks, currency, or any other company or person, or deposit money in the bank in large quantities. Take the insurance money is added to the fire, and is divided into insurance, the potential buyer, making sure that your property insurance on the building or fire.

What factors affect prices?
The amount or value of money for the kind of person, place, safe construction, operation and construction of buildings, equipment and safety are available, routes or areas to be achieved, the type of transport used.

How is the prize?
The premiums are calculated for a given period, say, 12 months or a single shipment or transportation of money. Used to enter = SUM (hop) x rate of contribution (in percentage). If the transaction is usually made in cash are made to the maximum amount insured whenever an application and the maximum amount of money insured in the year.

Currency Market

The American market is big money and most of the financial system in a country where hundreds of banks and other participants negotiated billions of dollars a day. This is a wholesale market for low-risk, high short-term liquid debt. Includes short-term U. S. Treasury and federal agency debt, negotiable certificates of deposit banking, opening of deposit accounts, payment of participation in bankers short-term bank loans, notes the city, commercial paper, federal funds and Eurodollars.

The heart of the silver market in the floor traders and brokers. In fact, there is a market, but the different instruments and different markets that remain close relationship. An important feature is the speed of any operations of hundreds of U.S. dollars U.S. dollars and trust between the actors. Trade is negotiated with the telephone terminal or a computer in seconds and does not break. The motto is: The word is my bond.

Borrowers in the market, including domestic and foreign banks, the government, enterprises of all types, the Federal Home Loan Bank and other federal agencies, dealers in money market instruments, and many states and cities. Lenders, including insurance companies and pension funds more and more other financial institutions.

Financial markets vital functions. The first is the transfer of large sums of money between banks. This is necessary because most of the big banks need more resources than they deserve in the form of deposits, while small banks have more deposits that can be used indoors profitable. Financial markets are a means by which the cash rich companies and other institutions can be diverted to the money, the banks in a short period of time.

The money market is where the U. S. Treasury to sell large amounts of debt easily. This is also the place where open market operations of the Federal Reserve to control interest rates and monetary expansion. The market is where the participants of the structure of short-term rate on Treasury bills and commercial paper yield different lengths to find out how. There is also a market for short-term funds at the international level, where the majority of dollars abroad, financed by foreign entities.

For more information, refers to companies and the rules for trading in financial markets, the book is highly recommended Stigum.

Money Market by Marcia Stigum is the definitive book about the aspect that is not widely known our monetary system. Introduction description given here consists mainly of excerpts from the 3rd edition, published in 1990 by McGraw Hill.

Bank Reserves Role

A minimum level of reserves was once considered necessary to ensure that the bank could meet deposit withdrawals. However, experience has shown that well-managed monetary system can function properly without reserve requirements. Some examples are the United Kingdom, Canada, Australia and Sweden. A fair question, what are the requirements for it, in fact, the U.S. system.

There is sufficient availability of credit suggest

Reserves include amounts deposited on the bottom most of the Federal Reserve Treasury. A bank can not hold sufficient reserves and breaks down again, if the total assets, including loans and securities, do not cover their obligations. However, a good bank can always borrow the money market or the Fed to meet reserve.

Measure the solvency capital of the activities of a bank is, the less its liabilities. Federal Reserve imposed a lower limit for the bank's capital relative to risk-weighted assets to leave a margin in case of insolvency. This relationship is ultimately what limits the creation of a bank deposit through loans.


The main function of the reserves

Even in the absence of reserve requirements, banks still have sufficient reserves to maintain the Fed to cover checks written by their depositors, and the money available to meet the demand for money. The Fed and other clearing banks generally require the payment of foreign currency will have no credit risk, rather than direct transfers between private banks to make credit risk.

Other useful features

Average reserves can provide a useful protection against disorders of the money market. For example, if there was an unexpected drop in inventories at the beginning of the creation of a bank, the bank may allow its reserves below the amount needed temporarily. Later, it could contain excess levels sufficient to restore the necessary means.

In the long term, the reserve requirement may also influence the amount of bank lending rates and deposit the amount of credit and deposits. The main issues to be addressed are: what is the level of reserve requirements, if they are paid (recovery of interest), and may cover a period of days.


The trend toward zero reserves

Reservations are not paid a tax on banks implied, but end up paying customers. The interest rate charged by a bank for loans should reflect costs.

United States, the required reserve ratio is 10%, no interest is paid on balances of reserves and the calculation period for calculating the reserves for 14 days. These rules are far from typical of central banks. In fact, the trend among major industrialized countries was zero reserve system.


A system of zero reserve

For example, Canada does not impose minimum reserves on its shores. central bank, the Bank of Canada (BOC), ready for a free night at the discount rate to ensure that the payment orders between banks will be deleted. This establishes a ceiling for overnight rates. It also pays interest on balances that banks hold at the BOC one percentage point below the discount rate of 0.5. This puts a floor on the percentages of the night. The money market rate volatility is limited to this area.

BOC rate target is the center of the field. To drive the overnight rate to achieve the objective, the market opened BOC similar to those used by the Federal Reserve. To compensate for variations in settlement of balances resulting from the inputs and outputs of the federal government on a daily basis BOC offers to purchase or sale of another government, the Bank of China at an auction in a closed group of representatives of the securities.

The dollar is a special case?

The United States would be better served by a system of reserves equal to zero is not a simple question. An obvious advantage would be the elimination of tax on U.S. banks. This will improve its competitive position in the world. But the dollar's role as world reserve currency should be considered a priority. The high overall level of transactions in U.S. dollars, without a sufficient cushion intervention and the size of those found in the Fed funds could cause serious problems.

Government spending and money supply

According to conventional wisdom, the federal government spends taxpayers' money. In fact, it creates all the money spent, and continues with the fees and sales of securities. In the long run, however, must spend at least how it goes. Otherwise, it would clearly support the claim monetary base money, which is the main part of the money, in which the economy works. To influence the amount of money credit issued by banks, the government should check the cost for banks to obtain the monetary base.

Management of the supply of base money

The Treasury pays the bills on behalf of the Government of the Federal Reserve These payments will inject new reserves of base money in the banking system. Since the increase in stocks may hamper the ability of the Fed to implement monetary policy, the Ministry of Finance as follows:

1. That the government spends to rebuild Fed with regard to transfers from the equality of commercial bank deposit accounts where the revenue from taxes and sales of securities. This eliminates the stock of base money created by its costs. total reserves of the banking system are the same, on average, allowing the Fed to make small changes to the reserves necessary to maintain control of the federal funds rate.
2. The Treasury fills their bank accounts in commercial revenue from taxes and selling bonds when there is a reduction in tax revenue. If tax revenues exceed the costs, the excess of net redemptions of securities. In this way, minimizes the interruption of all bank deposits in the private sector.

Balanced mutual funds flow

In fact, the Treasury recycles money base created by the Fed last year. entrances and exits to move bank deposits and reserves in the banking system without changing the overall average. The Treasury does not need others in their bank account, beyond what is necessary to cover payments in the short term. Normally it takes the value of public spending nearly a month, now average about $ 300 billion.

The increase in long-term supply of public money because of (1) net borrowing from banks and (2) the growing demand for the currency. The money supply growth, the Fed injected reserves into the banking system for the balance of supply over demand for direct federal funds rate, the main instrument of monetary policy. This is accomplished with the purchase of government bonds held by the public.

Because the government can always sell the securities

Until the federal government strengthens tax collection, the base currency will be in demand. Since the base currency earns no interest, when the private sector has more of what everyone wants to take the only alternative is the net interest on Treasury bills. The Ministry of Finance may pay this interest to market demands, then there will always be buyers of securities.

Basic of Banking

A good way to understand how banks can be considered a bank. The first thing to do in some of their money. You win, AOT has received a banking license if their capital at risk.

Start-up

The fact that the Prime Minister has accepted $ 6,000,000 in cash to increase with the help of other investors. This will be the chief administrative justice of the bank, the owner, the percentage of administrators. Then get a card, a rental building, offers all the necessary equipment, hiring and training of staff, and opens its doors for business.

You will need to submit the first part of participation Äôll the Federal Reserve. These funds will go to clear checks of their depositors. If money all enough in time, the demand for withdrawals by their depositors to keep later. Suppose that the initial cost of $ 1,200,000. This leaves $ 4,800,000 $ 2,000,000 available to guarantee the sum of 2.8 million in cash and the Central Bank.

Loans and other investments

How your company, customers have put their money to open accounts. Others are investing in savings accounts and certificates of deposit (loan) should be a competitive advantage for the interest rate payable. And still others resort to bank loans. To check whether potential borrowers good credit risks and are able, the cost of capital and interest on such payment date.

Accounting Needs

When managing the bank will identify a set of accounts, and their decisions, the bank, the administrative and operational profitability. The most important element is balance. This shows, at some point, the bank assets of the director (like you), Thanks for the debt (for what else) and equity (which is one of the owners). The fairness or justice, equal to assets minus liabilities. This chapter should remain positive and more preferably. If time is very small compared to total assets, including the Governor of the Bank.

Balance sheet and profit forecasts

If the bank goes well, the new balance of assets and liabilities will be expanded. Fairness should also be increased, provided that some of the profits for the bank rather than paying the dividends they receive to all owners. It began with an initial capital of $ 6,000,000. The fact that the PM look at the budget when the economy for some time. Indicated by the forecasts for the next year.

The projection is based on expected additional revenue rate of the Bank, the faculty of administrative officials and the cost of borrowing. Also shown is the projected cost of the work, or fixed costs include the cost of rent, insurance, utilities, salaries, etc. The numbers in blue are items that you try to change or to see how we can influence the performance measurement more significant return on capital. Sure, we need to cultivate relationships minimum required by regulators.

Development Management

Note that the capital has increased from 6.0 to 1 USD $ 10,500,000 due to retained earnings. You have a lot of savings, the review of current accounts pay no interest. Others have reported at market rates. All deposits paid account with additional costs.

With additional resources in the reservoirs of its assets in what hope for the future revision Revenue: $ 5.0 million to reserve $ 7,700,000 bonds, $ 1,100,000 loan to other banks 110,000 in loans and $ 0000. Your concept of net income after taxes for next year $ 1,510,000. This would be a return on equity of 14.38% and return on investment of 1.21%, which should work fine.

The ratio of work required

Bottom left of the table for three reasons you should stay above the thresholds of the Committee on Banking Supervision. The capital is the ratio of the bank, the reputation of managers to total risk weighted assets of the bank. Rates for bookings of 0, 0 for government bonds, loans to banks by 0.2 and 1.0 for conventional loans. A minimum capital adequacy ratio of 8% is needed.

Leverage is the ratio of bank capital to the weighted sum of assets. The minimum requirement is 3%. The reserve is the ratio of reserves a bank (deposits at the Fed and the money safely) in which your application, deposits of checks. The minimum value of 10% for large banks, but only 3% for the first $ 45.4 million of deposits, which are the cause of small banks.

What is the impact trade indices running

When a bank loan on a regular business (A) and liabilities (increase L) as well. Your Reservations (R) remains unchanged, leading to a reduction in the reserve ratio (R / L). The capital, namely capital (C = NR) remains unchanged, resulting in a decline of participation (C / A).

When the borrower spends the money, end up going to another bank, C, D, L and also decreased. Since D is usually a fraction of L, the reserve ratio is reduced by an amount equal to about the relative variation of R. Since C is generally a small fraction of A, the ratio of capital increase for an amount approximately equal to the relative variation of C.

If the borrower pays interest on the loan from a bank will not change L and R. This leads to an increase in the ratio of solvency and reserves. If the borrower pays interest from an external source, A and R, while the increase of L does not change. This leads to an increase in the solvency ratio and reserves.

If the borrower has repaid the loan to deposit, R remains unchanged, while A and L are the same. This leads to an increase in the solvency ratio and reserves. If the borrower to repay the loan from an external source, R increases, while A and L remain unchanged. This leads to higher rates, but no change in the share capital.

When a bank buys something for himself by issuing a check. If the beneficiary of the project with the same bank deposits, advances received increasing L, A and C do not change. If deposited in another bank, D, E, L, during the fall remains unchanged. In both cases, the relationship between capital and the rate of bank reserves fell editor .

Although there is still much to learn about the banks, this simplified model, the data for small banks. But banks are much more complex arrangements. Some loans are a small part of society. The following article summarizes the main activities of large banks.

Money Insurance

Almost all companies, cash, checks, credit card slips and manipulation of the bankers, which makes this type of insurance is mandatory. Stride Limited provides insurance that provides coverage for your money when you are insured or employed in a bank night safe on the floor in a safe place or even a small amount of money at home directors or Employees in the event of an attack.

Accident insurance is also for those who have money, includes damage to clothing, damage to stamps and safe.

There is no insurance money is usually in the privacy of another company. It is often automatically included in the insurance package, but can also be added to large complex business risks.

Money Supply

What is meant by the money supply? The word itself means a certain amount at a certain time, even if the amount is unknown. Indeed, it may be useful measureof number was developed in accordance with the request.

The Fed acted arbitrarily using the money, even to assist monetary policy decisions. Money is like cash in circulation and all deposits and savings banks. At one point, to set targets for monetary expansion. However, the majority ignored their wisdom, have found little correlation between them and their political objectives - to reduce inflation and unemployment.

Monetary Aggregates

The Fed has defined three monetary aggregates M1, M2 and M3. M1 narrow definition includes bank deposits and transactions in currency in circulation. M2 adds savings accounts, time deposits in banks and retailers, and maximize the money market funds. M3 adds time deposits, repurchase agreements, dollar, euro, institutional money market funds, including money insurance. In March 2006, the Federal Reserve stopped tracking M3, because it provides information about economic activities, functions that have not been included in M2.

Note that the definition of money supply the Fed, which only includes non-banking sector. This will give stocks, cash and deposits, directed the Fed, even if the partof the monetary base is not included in the monetary aggregates. This means that even if the bank increases the money supply. If you receive payments from the public as interest on loans, reducing the money supply. For information about the money insurance can be seen here.

Bank line of credit as cash equivalents

A major weakness of the definition is to ignore the Fed credit facility, which can be done at the discretion of the borrower. These companies often have large lines of credit with banks, which can be used in the short term. Just as consumers have a credit line on credit card bills and money insurance, which is very useful for purchases as demand deposit or money in your pocket. Improved cash credit line that is important in the end, the global demand increases.

If someone uses a credit card to purchase an automatic extension, the money supply. Sellers receive a new store, bringing the total deposits in the banking system - until the buyer pays the loan. The result is that consumers who pay their loans to pay off their credit cards rather than increasing the money supply on their own initiative, hundreds of billions of dollars. In fact, money is far greater and less calculated the definition of the Federal Reserve.

The quantity theory of money

Economists use the term to regular supply of money without it. An important example is the equation of variation of the quantity theory of money.

MV = PT

This is the money supply, M, and the velocity of money, V, the average price level, P, and the total number of transactions, T, again. This equation is just an identity, which means that it is true by definition. However, it is often used to "prove" that the average price increase on the amount of money. Sun says nothing about the causal relationship. All I know is the product of MV, as equivalent to national income, PT, which in turn can be measured. The amount of money, M, is still undefined and unknown.

Description of Money

Primary Money

Money plays a central role in our lives, but nothing can be completely free from ambiguity. This article describes only some basic ideas, but should contribute to general understanding of what and how to get the money.

Two Types of Money

Money is a sign that is generally accepted as a medium of exchange. Trademarks can be tangible, such as a coin or a note or intangible assets such as deposits. If the token is transformed into a commodity as precious as gold medals are known as commodity money. Commodity exchange rates vary, but generally greater than the value of a commodity. A bullion coin is a token could be converted into precious metals contained in the file.

If the voucher is essentially useless and non-convertible, the government should give them a special status to make them suitable as money. Good is known as the greenback. In addition to collectibles, all government data released today is the greenback. Therefore, we must avoid thinking in terms of commodity money in the modern understanding of money.

In an era of price of commodity money, the publisher has been limited by the need to ensure adequate supplies of goods taxable account. There are no restrictions as in the case of notes. The value of paper money because it depends on the policies and actions of the issuer, usually a country's central bank. The rest of this paper is on the U.S. monetary system and does not need to go to another country.

Fiat money as a tax

the general acceptance of paper money by the government in his capacity as legal and the facts necessary to pay federal taxes. Those who have no reason to get a tax because the value of paper money to those who do. So paper money can be regarded as a tax credit to be used as bargaining chips for the government to collect taxes on a large scale impact.

Money Primary

Fiat money in the hands of the private sector is known as the monetary base, which will be called the monetary base. The main problem of money the Fed to purchase securities to the public for their portfolios, including the Treasury's debt. Powered by deposit in a bank's Federal Reserve Bank of the seller. This is known as the receiving bank loans.

Money Bank

bank deposits, known as the money from the banks when granting loans only on the borrower's account is credited with a new store. Increasing the amount of money for bank loans of the bank. When a loan, the amount of money the bank lost.

The value of money from the bank, based on promises that can be converted into cash on demand at face value. Regulations currently require banks to money from the reserves of at least 10% of the deposit transaction to hold. Reservations may be stored in a combination of cash and security deposits when fed. No reservations are required for the debts of other banks such as savings accounts or certificates of deposit.

Reserve price control

Although there is no reserve requirement, banks have sufficient reserves to depositor Tired JVC and time enough money to meet the demand of market needs. The need for reserves and active interbank market where banks can borrow or lend reserves to each other to create. Interest on short-term transactions are called Fed funds against.

The Fed is directed against the target Fed funds rates through open market operations. Includes the purchase or sale of securities on the open market to add or release of reserves needed for the systems of supply and demand balance for the target Fed Funds rate.

Each bank in good and sufficient collateral to borrow short-term reduction in box Fed Fed interest of 100 basis points above the Fed Funds target rate. With a significant difference, the discount window is used by banks to issue temporary liquidity problems and could not be applied as a source of reserves for additional loans.

Note: During the subprime crisis of 2007-2008, the Fed lowered the discount rate by 25 basis points above the Fed Funds target rate to increase liquidity in the banking system. The result will be a temporary measure.

The role of response Fed

Because the control of the Fed reserve price rather than quantity? The answer is the estimated quantity of liquidity risk in the banking system at risk. For example, increasing the debt through a public commitment to cash flows from the banking system safety. If the Fed responded by injecting reserves one or more banks or are able to reserve requirements or require the withdrawal of depositors meeting.

reserve price is also more effective in controlling the volatility of the Federal Funds rate, so banks are interested in filling their loans. The company is able to effectively plan, when the banks are subject to price changes are large and unpredictable.

As a result of the Fed's target for the price, the bank can vary the money supply with demand. Expands and contracts based on factors that influence the appropriations of the private sector. Thus, the Fed essentially a reactive role, adding or draining cash reserves necessary for the banks and Fed funds during the course.

Restriction of bank loans

Why compliance with the reserve ratio really does not preclude the bank loan, what the banks to prevent and respond to the needs of the loan? The answer is that each bank must also meet the requirements of fairness. This is a complicated formula that rates the risk assets of banks and capital needs of this part of the RWA.

A bank can get into trouble with the creation of excess energy through loans. A bank with adequate capital in relation to the activities under his supervision has been addressed by regulators that the company could then a new loan applications were approved.

Define money supply growth

Another important question is what are the money supply to reduce the excessive expansion of bank? Banks are in business of hire purchase. If borrowers are willing to pay the credit level, banks usually lend, even if it has the backup needed to borrow after the event. Only defense against the creation of excessive supply of money in the bank's central bank, the price back up to the point of slowing demand for cleaning.

question the basis of monetary policy by the Fed to offer money to the bank to maintain balance with the needs of producers and availability of products and services. Which requires knowledge about the economy and the ability to interpret data. The mismanagement of the minimum price, good economy to push inflation or recession track. This is a difficult task, and the Fed has a market share of mistakes over the years is usually apparent only later.