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September 19, 2021 

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ECU: The abbreviation of the European Currency Unit, which is the forerunner of the euro that will be officially introduced in the European Union in 2002. The European Currency Unit is the weighted average of the currencies of the twelve original nations of the European Union. In that there are is no paper currency yet, it is currently used primarily for big-time commercial, financial, and international transactions.

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Lesson 19: Money Creation | Unit 1: A Little Magic Page: 1 of 23

Topic: Money <=PAGE BACK | PAGE NEXT=>

First:
  • Money is currency and checkable deposits.
  • Currency is issued by the federal government.
  • Checkable deposits are issued by commercial banks.

    Second:

  • Money is the medium of exchange.
  • Money makes production and exchange more efficient.
  • Too much money causes inflation and too little causes recession.

    Third:

  • Banks balance profit-seeking loans and deposit-protecting reserves.
  • Because a failed bank can trigger economic instability, banks are heavily regulated by the government.
Note:
  • Controlling checkable deposits is controlling a little magic.

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OPEN MARKET OPERATIONS

The buying and selling of U.S. Treasury securities by the Federal Reserve System (the Fed) as a means of a controlling the money supply. An increase in the money supply is achieved when the Fed buys securities. A decrease in the money supply is achieved when the Fed sells securities. The Federal Open Market Committee is the specific component of the Federal Reserve System that is charged with open market operations. Open market operations are the most important of the three monetary policy tools that the Fed can use, in principle, to control the money supply. The other two are the discount rate and reserve requirements.

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Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway wanting to buy either a graduation present for your niece or nephew or a toaster oven that has convection cooking. Be on the lookout for attractive cable television service repair people.
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The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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