7/30/2019 FIIM Slide Notes

1/4

wish to bear, and allow others lower cost methods to gain expos

reasonable to require greater transparency in OTC derivatives to

promises they make. Derivatives that involve payments of princ

should be required to be traded on an exchange so that there ar

reasonable limits to speculation.

Slide 17

Institutions that accept insured deposits must be regulated by th

governments liability. Insured deposits are a low cost source of

burden increases these institutions costs significantly.

FIs that receive contractual payments, such as life insurers, pens

insurers have steady premium income to invest. This allows the

investment portfolio.

Slide 18

Point out that banks are the nations largest intermediary, althou

7/30/2019 FIIM Slide Notes

2/4

ore gn un s supp ers exam ne e same ac ors as . . supp ein expected changes in currency values, global interest rates, diff

There is typically some built in demand for U.S. investments how

a safe haven, i.e., a country with relatively low political and econ

GBP used to be the reserved currency.

Reserve currency, the one who determines that value of the curr

During the gold standards, u need to have the same amount of g

amount of currency. So that when international businessmen co

trade in local currency and then convert is to gold and bring back

High levels of reserves are indicative of foreign central bank activ

of their currencies against the dollar. This may be done to stimu

dollars are often reinvested in the U.S., typically in Treasuries. T

financing to the U.S. and helps remove a market discipline from

Slide 46

7/30/2019 FIIM Slide Notes

3/4

There are also tradeoffs in U.S. monetary policy and the value of

may cause the dollar to drop, particularly if U.S. growth remains

If the Fed keeps U.S. inflation below the rest of the world then t

all else equal, and with a strong dollar U.S. imports are likely to e

trade deficit. This is why international monetary policy cooperat

meets periodically to coordinate policies.

Slide 13

The AMLF and the CPFF were created because liquidity collapsed

The MMIFF was created to help stem liquidity problems in mone

when one fund failed. The TALF was designed to encourage secu

securitization have reduced the amount of credit available to bo

Slide 16

The Fed Wire facilitates trading of bank reserves

7/30/2019 FIIM Slide Notes

4/4

This assumes no drains.

The amount of drains is not very predictable. For instance, decre

cannot be guaranteed to lead to increases in the money availabl

higher amounts of excess reserves at the Fed (as they did in the

Changes in the reserve requirement are rarely used as a moneta

because it is difficult to predict the effect of changes in the reser

Changing the ratio frequently would likely impose additional cosattempts to manage and minimize its excess reserves.

Slide 29

Some economists believe that the Federal Reserve should annou

monetary policy changes to hitting this target. Others believe th

type of monetary policy rule where the rate of money supply gro

economic growth rate. Most economists however believe that t

system that require more intervention by the Federal Reserve th