Bank Reserve, Gold Standard and Bitcoin
- What is the function of bank reserve? What is it used for?
- Which thing is most commonly used as bank reserve in modern economies? Which thing was most commonly used as bank reserve historically?
- What is the history of Gold Standard in Europe and the U.S.? (Google-wiki can help.)
- What is the appeal of Gold Standard?
- Read “Gold Standard International comparison” and “Gold standard and great depression.” What is the damage caused by Gold Standard in the Great Depression?
- If Bitcoin becomes the currency of the world, what could go wrong?
The 1MDB scandal
Please read the material of the web links below and think the following questions:
- What is the commission rate that Goldman Sachs charged for the 1MDB bond issuance?
- To which one of the three block businesses that we learnt in the first lecture did Goldman’s service belong?
- What is the interest rate of the bond issued?
- From these numbers can you deduce any abnormality with the issuance?
- What’s the true purpose of the Malaysian in its charging Goldman?
1. Malaysia finance minister wants $7.5bn from Goldman | Financial Times
2. Malaysia charges Goldman Sachs executives over 1MDB scandal
3. Background information:
- Read “Great chain_Economist” and “The trust machine_Economist” (also in http://www.economist.com/news/leaders/21677198-technology-behind-bitcoin-could-transform-how-economy-works-trust-machine?frsc=dg%7Cc and http://www.economist.com/news/briefing/21677228-technology-behind-bitcoin-lets-people-who-do-not-know-or-trust-each-other-build-dependable) and “Blockchains 20151129”. Think the following questions.
- How does Bitcoin work?
- How do Blockchains work?
- What are the implications of Blockchains for the businesses of investment banking?
- What are the implications of Blockchains for commercial banking?
Q0: Read Section 1 of [MW conflicts of interest], page 657-660. Understand the conflict of interest that the paper is investigating.
Q1: Read “Global Analyst Research Settlements 2003”. Investigate the cause of the settlements and the reforms that they suggested.
: Read “In J.P. Morgan Emails, a Tale of China and Connections WSJ” and “JP Morgan isn’t the only big financial firm to have hired Chinese Communist Party scions “, both in the Moodle. Why could this type of hiring practice a sign of corruption? Investigate if there is evidence for the corruption.
Q1: Read: “John Kay the-world-must-learn-to-deal” (which is online). Critically evalu-
ate his point of view based on what you have learnt from Wang (forthcoming, International
Journal of Central Banking). In particular, comment on his statement that “What is not only
not needed, but should be strenuously resisted, is the development of a system of regulatory
supervision of large corporations which purports to reduce or eliminate the probability of
their commercial failure”. Can the procedure to handle bankruptcy of utility …rms can be
straightforwardly applied to handle bankruptcy of banks?
Q2: In a banking crisis, no real factors of production are lost, whereas in a natural
disaster like a tsunami, we see a heavy loss of human and physical capital. Why does a
…nancial crisis usually cause even greater damage to an economy than a natural disaster? If
the banking sector of an economy su¤ers a huge loss, why would it be a serious concern to
the general public, few of whom are banks’shareholders?
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Bank Reserve, Gold Standard and Bitcoin
