Sign Banking Presentation Massachusetts Easy

Industry sign banking massachusetts presentation easy

so that's the end of unit three and I hope in unit three we learned something about the way that companies make decisions investment decisions and hopefully that gives you you know some ideas around where the Treasury bills were dropped why the cash to deposit ratio was increased why the central bank governor is like sort of Russia foresee anything you've got to change the way he the team at central bank seemed to be you know looking at these series and thinking you know how can we stimulate growth on the basis of these how can we push people into making more investment decisions how can we you know push these firms and stimulate the economy in terms of more capital accumulation so now we're on to the juicy bits of economics and monetary policy and the central bank and I love monetary policy I think it's such an interesting area of economics and I write at this point I'd like to talk about you know the ways that the areas of economic policy so the way I see it there are four main areas of economic policy there's monetary policy which we're about to talk about this fiscal policy that we'll talk about straight after the structural policy and there is exchange rate policy so monetary policy is really all about the things that the central bank can do to affect the supply of money so all the tricks that the central bank team and the central bank governor play or the economy out of the banks to try and get them to do what they want they didn't have direct control but there's lots of things that they can do to sort of pull the strings like a puppeteer doing a puppet show from above to try and get these puppets to do exactly what they want but if you've ever seen a puppet show before it looks very coordinated right when you pull the string the puppets arm moves up and when you put down the string the puppets are moves down unfortunately why don't you follow see isn't as accurate as that and I will talking about wonderfully c3x slides fiscal policy is what the government does so that's more on boo Harry's the vice-president and ministers that's they influence and obviously the Senate as well influence fiscal policy because fiscal policy is all about taxes and all about government spending and all about how much the government is boring but physical and Pollak monetary policy are obviously closely related and I'll be talking about that's not in this unit but in unit five structural policy is all the things that my good friend or some of the things that make it friend and almost like a sister Jamar Care is doing with ease of doing business so those kind of things are around you know customs how the customs work our borders work how easy is it to do business you know how what kind of collaterals are used to get loans all the kind of structural things minimum wage visa-on-arrival for investors that kind of stuff is all like the structural stuff which isn't like monetary policy is a fiscal policy but it's stuff that affects economic grace nonetheless and then forex I'll be talking about in the last section which is exchange rate policy so let's jump into monetary policy monetary policy is kind of like governor ma fillet and his team speciality and he and his team at the CBM used three types of tools to sort of control the money supply one is you've heard a lot about this or more open market operations to is a required reserve requirement and three is a discount rate so how do these three tools work the discount rate is something that they can adjust which is rate at which moenay's lends to banks now when banks themselves can lend money at very low rates so when banks can't get money at very low rates then their money is cheap right the money in the banks becomes really cheap so when banks can lend money cheaply they can lend it to customers or they can lend it to corporates cheaply so the trick there is whenever the central bank wants banks to start lending more they simply reduce the discount rate so banks can borrow more at cheap rates and therefore that benefit should translate to customers the second is reserve requirement or in Nigeria the CRR and this means that there's a proportion of money that every single bank in Nigeria needs to keep and not touch in the central bank so imagine if the reserve requirement was like 90% they'd have nobody to lend out anyway because everything would be at CBN so the higher the reserve requirement the less money that banks have available to lend out to people so in the same way right when there's when they want to manipulate the bank so when the puppeteer wants to you know change some things in the economy what he what the puppeteer does is simply reduce the amount that they have to keep in CBM so they have more money to borrow out and vice versa the last one and the most famous one the one that gets the most press attention is open market operations and this is the way that the central bank uses Treasury bills that are sold to commercial banks to increase or decrease their liquidity so when now all banks in Nigeria anywhere around the world hold government Treasuries right so and they hold a lot of them so when you know when the banks when the central bank wants people to or the bands to start borrowing more it you know just make sure that it's buys a lot of the Treasury bills to decrease the amount decrease or increase the amount of cash available in and it buys and sells Treasuries or the open market so what the central bank has done is that it uses those Treasuries to influence the banks to buy to either sort of buy or sell depending on what it wants to do so if if the aim is to expand the economy then the CBN will buy Treasuries and that pours cash into the banks and that puts pressure on the banks to lend because they have too much money if it wants if the economy is overheating then it sells Treasuries and that pulls money into the system and then money gets tight and the banks don't have as much money to lend so mo is very very controversial because the central bank has kind of restricted their sale of these Treasuries to try and push you know more liquidity into the banks so that they are forced to lend and they can't rely on Treasury bills and that's why you know here everybody talking about market operations but really the thinking behind restricting the access is trying to make sure that banks now use their money to lend so what is inflation targeting and the money supply this is something that so central banks really have it depends on the central bank actually but they have most central banks around the world have about three responsibilities they have to control inflation control unemployment and maybe sometimes they have some responsibility for economic rate as well but one of the things one of the things central banks around the world keep a big eye on is inflation and the money supply so inflation targeting is kind of a monetary tool where central banks set a specific goal of a particular inflation rate that they're trying to reach so that's inflation targeting and I have to talk about the money supply briefly as well the money supply is sort of total value of money available in the economy at any point in time so m0 and m1 according arrow money and that's like the money that can easily be converted to cash like the money in your current account the money in cash or the money that can be converted to cash m2 includes m1 but also includes short term deposits in banks and certain money market funds are relatively easy to access so not the ones that last for like you know not the long lasting ones the ones that are still relatively easy to access and then m3 includes m2 but also the longer term money deposits as well the tailor room this is like one of them is quoted things in economics when you're talking about how central bank's make decisions around inflation so the Taylor rule guides central bank's about how they should alter the interest rates due to changes in the economy and the Taylor rule is like it's like a it's like a calculation which the central bank's use to control the economy when you know control different factors of the economy when what in it basically dictates what interest rate the central bank should use to control and stabilize the economy so the equation it's a very very complex equation is in the corner but basically I think the thing to know about the Taylor rule is that there is a rule that exists in economics that kind of guides not really it's not as if all central banks follow it but if they're wondering about what inflation and what in interest rate that they should set to bring inflation down to control inflation to get closer to the inflation targets then there's a rule that kind of helps some of this as an equation that kind of helps them with this so that's really the long and short of the Taylor rule but it's something to know because economists talk about a lot they talk about on the news they talk about in debates so I so I've spoken about sort of the three ways that great puppeteers in the Central Bank of Nigeria sorts of control what's going on in the economy at least try and control but I'm gonna talk about like the actual journeys that these sorts of high-level puppets controlling moves actually with the journey that takes down into the economy and these are called the monetary policy transmission mechanisms so if you've ever driven a car like the way I see it is the like the gear right you move your gear and it does something with the engine that affects the movement of the car if the if there's no fluid in the gear there's no gear or ello every call then it doesn't quite work as well and you can have you know the what you do with your hands on the gearbox doesn't actually translate to what your car is doing if there's something wrong with the gears and in the same way I think the monetary policy transmission works so the CBN have compared now comparing them to people that drive with a gear policy transmission mechanisms basically have two widely accepted channels so when monetary policy is done any of the monetary policy interventions are done data go into the monetary Channel or they go into the credit channel so the monetary channel is the effects that what they do has on lending deposit rates and open market operations and that affects the supply of money so they can affect that's why I described the money supply it affects you know how much money is in circulation and how much money is in circulation there's available effects you know corporate investment right if there's loads of money available and it's really cheap then the companies tend to invest if it's not then they tend to draw back and then the second is a credit channel and this is you know the total credit limit so it affects the scale and structure of the total credit like how much total amount of money is available and this affects corporate financing and investments apply as well so there are some other channels that are not so relevant in Nigeria like the household channel for instance in countries that have you know mortgages in countries that have a lot of personal credit where you know in America or England you can get a loan from the bank people individuals get loans from banks for chairs and tables and home improvements and to build you know an extra pool or pond in their house these kind of things so monetary policy can actually affect households as well in some types of economies but in Nigeria monetary policy isn't actually that effective so I get a lot of questions about the CBM like you know why are they so interventional why are they giving retail loans why are they doing poetry business why are they doing agriculture and the reason why developing central banks in developing countries you know tend to be a bit more interventional than what you see at the European Central Bank or you see at the Fed in America is simply because a lot of business in Nigeria is actually informal there's a whole area of you know Ebola and for instance where they have their own venture capital system which does not involve the banks at all they have an apprentice apprenticeship system and this is like a billion billion dollar industry right where you know after somebody has served for a couple of years they give them money to start up on their own so that kind of system is there there's all these odd your system so the Unbounce population is pretty huge in Nigeria and the formal sector is quite small so all this monetary policy that we're talking about only really affects a very small amount of people and doesn't have the kind of like large effect that would have on a more formal economy so you know our puppeteers try the traditional methods are known to work in developed countries but it doesn't get the same results like this literally no so channel in Nigeria but you know household finance in the UK and the US and in Europe is actually you know a big part of a big part of the economy so I'm just putting these contrasts out there to try and put some more information into the system as to why certain decisions are made and sort of certain interventions that made