Mission of Central Bank

Lecture of Ben Bernanke about mission and origins of the Federal Reserve.
http://bcove.me/ixbreqs2

'''LECTURE ONE: ORIGINS AND MISSION OF THE FEDERAL RESERVE '''

'''Lecture 1, Video Clip 1: A central bank and its mission '''

Time: 6:27 to 8:42

Length: 2 minutes; 15 seconds

''Questions for Classroom Discussion: ''

1. What is the mission of a central bank?

2. What is the difference between the economic stability and the financial stability parts of the mission of a central bank?

3. Explain and give examples of how those missions are related to each other.

'''Lecture 1, Video Clip 2: The policy tools of central banks'''

Time: 8:42 to 12:45

Length: 4 minutes; 3 seconds

''Questions for Classroom Discussion''

1. What are the policy tools that central banks have?

2. Explain how monetary policy can function

to achieve economic stability.

What is the role of interest rates?

Explain the process of how the Fed changes interest rates and how those changes encourage an appropriate increase or decrease

in spending in the economy?

3. Analyze how a second tool, the provision of liquidity, can help to

promote financial stability.

Describe how the lender- of- last- resort function of a central bank can reduce runs on banks.

4. Discuss the regulatory role of a central bank. What is its

purpose?

'''Lecture 1, Video Clip 3: Origins of central banking'''

Time: 12:46 to 15:03

Length: 2 minutes; 17 seconds

''Questions for Classroom Discussion:''

1.Why were the

first central banks

established?

'''Lecture 1, Video Clip 4: Financial panics'''

Time: 15:04 to 19:49

Length: 4 minutes; 45 seconds

''Questions for Classroom Discussion:''

1. How would long- term illiquid assets and short- term liquid liabilities contribute to conditions for a financial panic?

2. Why is a bank run so difficult to stop?

3. What is a financial

panic and what can cause a financial panic?

4. Describe how a financial panic can lead to loss of income and employment in sectors of the

economy seemingly unrelated to the financial sector

'''Lecture 1, Video Clip 5: Lender of last resort'''

Time: 19:50 to 23:19

Length: 3 minutes; 29 seconds

''Questions for Classroom Discussion:''

1. What does "lender of last resort" mean?

2. Analyze why liquidity is such an important issue.

3. What is the difference between illiquid banks and insolvent banks? How does that difference affect the lender- of- last- resort role of central banks?

4. How does the lender of last resort help prevent bank runs? And by doing so, the chances of a broader financial panic?

5. Why might a bank run worsen if a bank has to sell assets in response to depositors' withdrawals?

'''Lecture 1, Video Clip 6: Financial stability prior to the Fed'''

Time: 24:00 to 28:04

Length: 4 minutes; 4 seconds

''Questions for Classroom Discussion:''

1. Describe the need for financial and economic stability that led to the establishment of the

Federal Reserve in 1914.

2. Summarize the role of monetary policy in affecting short- term interest rates.

'''Lecture 1, Video Clip 7: The gold standard'''

Time: 28:04 to 40:07

Length:12minutes; 3 seconds

''Questions for Classroom Discussion:''

1.What is a gold standard?

2.Identify two possible problems with a gold standard and explain why those problems are

created by a gold standard.

3.Explain how shocks can spread among countries under an international gold standard.

4.If interest rates are different in two countries that are both on an international gold standard,

what will likely happen?

5.What might cause a run on gold in a country? What are the consequences of a run?

6.How can a gold standard create stable prices over a long-run period?

7.How can a gold standard cause a deflationary period? What is undesirable about falling prices?

8.Compare the costs and the benefits of a gold standard

'''Lecture 1, Video Clip 8: Establishment of the Federal Reserve'''

Time:40:18 to 43:48

Length:3 minutes; 30 seconds

''Questions for Classroom Discussion:''

1.What economic conditions led to the establishment of the Fed in 1913?

2.How would you describe the economic and financial stability missionof the Fed?

3.What is the decentralized structure of the Fed and why was it designed in that

fashion? Has this made the Fed a more stable, longer-lasting institution? Why or why not?

 

'''Lecture 1, Video Clip 9: The Great Depression'''

Time:43:48 to 51:39

Length: 7 minutes; 51 seconds

''Questions for Classroom Discussion:''

1.Summarize the economic conditions and events during the Great Depression. Discuss the stock market crash, the change in price levels, the fall in output, the rise in unemployment, and the increase in the number of bank failures.

2.Describe the major causes of the Great Depression and explain how each of them may have

contributed.

 

'''Lecture 1, Video Clip 10: Policy during the Great Depression'''

Time:51:48 to 55:37

Length:3 minutes; 49 seconds

''Questions for Classroom Discussion:''

1.Describe monetary policy during the Great Depression.

2.What monetary policy errors were made? Why were those errors committed?

3.Summarize the Fed’s policy as a lender of last resort during the Great Depression and evaluate its effects.

4.Discuss the role of

the gold standard during the Depression and the resulting level of interest rates in the economy

 

'''Lecture 1, Video Clip 11: President Roosevelt’s economic policies'''

Time: 55:38 to 57:29

Length: 1 minute; 51 seconds

''Questions for Classroom Discussion:''

1.Summarize the role of deposit insurance in ensuring financial stability.

2.Why would the abandonment of a gold standard positively affect economic conditions?

3.List the primary monetary and fiscal policies that were used during the Depression. Evaluate the effectiveness of those policies. What can we learn about policy today from that experience?

What would be a more effective set of solutions?