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SAVINGS ACCOUNTS: Accounts maintained by banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money. These accounts, also termed transactions deposits, let customers set aside a portion of their liquid assets that COULD be used to make purchases. But to make those purchases, savings account balances must be transferred to checkable deposits or currency. However, this transference is easy enough that savings accounts are often termed near money. Savings accounts, as such constitute a sizeable portion of the M2 monetary aggregate.

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Lesson 20: Federal Reserve System | Unit 2: What It Does Page: 5 of 20

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The United States had two attempts at central banking in the late 1700s and early 1800s. From 1836 to 1913, a period marked by perpetual economic turmoil, the United States had no central bank.

With no central bank:

  • Banks played fast and loose with deposits and loans.
  • They came up short of reserves and were forced to shut down, taking deposits with them.
  • When deposits evaporated, so too did the financial wealth of customers and part of the money supply.
  • Bank closings were seldom isolated events, bank panics usually spread rapidly throughout the economy.
  • Without money, production went unsold and resources were unemployed.

  • The Federal Reserve System was established in 1913. although imperfect, it has helped stabilize the economy.

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FEDERAL FUNDS RATE

The interest rate charged by one commercial bank or depository institution for lending Federal Reserve deposits to another commercial bank or depository institution. This is the interest rate determined in the Federal funds market. The Federal funds rate is a key interest rate for both the banking system and the macroeconomy. It is often targeted by monetary policy and is a benchmark used to determine other interest rates in the economy.

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Today, you are likely to spend a great deal of time going from convenience store to convenience store wanting to buy either a birthday greeting card for your grandmother or a coffee cup commemorating yesterday. Be on the lookout for defective microphones.
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A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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