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https://www.independentarabia.com/node/364776/
How did the idea of central banks appear around the world?
Sweden developed the first plant in 1668 and the goal of its establishment was to "finance military spending" in wars
Mahmoud Abdo Journalist Wednesday 24 August 2022 22:38
The Bank of England building in central London (AFP)
Economic success and growth are always linked to the success of the country's central bank, which formulates monetary policy to be in harmony with its financial counterpart, and
thus a successful economic policy is achieved.
The idea of the central bank is not an original right of the modern era, but it has its roots in ancient and medieval times.
In ancient Egypt, the priest of the temple was not only a religious chief, but was also on a great degree of economic readiness, and in one way or another made his position the beginning of a nucleus It is similar to economic and financial centralization, so it manages people’s livelihood matters, and provides them with assistance in times of distress, calamities, calamities and epidemics.
The faithful guard
The economic writer Zakaria Mahran explains in his book “Central Banks in Different Ages,” that
“the ruler of Venice in the Middle Ages decided to establish the (Wenice of Bank) in 1171, with a forced subscription that he imposed on the rich, and pledged to them to guarantee a profit of at least five percent. annually, then he involved the government with them with money, and made the management of the bank to appoint employees to manage it.” Mahran added,
"This semi-governmental central bank was very successful, which prompted other countries to follow the same approach.
The Saint George Bank and the Bank of Barcelona were established in the 14th century, and
the idea spread from one country to another, until the Dutch took it with the growth of their possession, the activity of their trade and their colonial expansion,
They established in Amsterdam its well-known bank (Amesterdam Bank-Wisselvan) under the auspices of the Dutch government in 1609.
The idea of central banks has developed in the modern era from a mere voluntary decision between countries to the extent that a head of state may step down or overthrow a system and the central bank does not fall.
Then Britain launched its central bank, to be the most famous central bank in the world so far.
And the central bank’s first goal is to
little by little it has become involved in
they are The custodian of their money.
Between independence and accountability
But what is the role of central banks in the countries of the world?
And how much independence do you enjoy?
What about the classic disagreement between it and fiscal policy?
The tasks of central banks around the world are numerous, and
perhaps the most prominent facts that governments highlight is the independence of central banks.
The financial advisor and head of the Monetary and Capital Markets Department at the International Monetary Fund, Tobias Adrian, explains in a report on the official website of the International Fund in 2019 that
“in the aggregate it is considered independence Central banks is a relatively new thing.
The idea gained traction in the 1970s, but
it has proven to be an important and stabilizing factor for countries seeking to free monetary policy decisions from political influence.
However, after ten years of central banks playing a pivotal role in the face of the global financial crisis, we find that they are struggling to accomplish the tasks entrusted to them, under difficult circumstances.
From Europe to the Americas, and from Africa to Asia, disaffected voters and their countries are calling for increased bank accountability. Central, and some of them became skeptical about the value of its independence, which was once preserved to the point of sanctity.
Former Egyptian Finance Minister Samir Radwan (the first finance minister after the January 2011 revolution) says,
"The role of central banks in the traditional world in the early beginnings is focused on confronting inflation rates, and
the main mechanism used is interest rates only,
but after the global financial crises in 2008 Other tasks have been added to central banks, as it is targeting a specific growth rate and employment rates,
which is not happening in Arab countries at the present time,
especially in Egypt, as the main goal is to target inflation rates only. Radwan pointed out that
"any country in the world has a targeted economic policy that relies on two wings, the
monetary policy is the competence of the Central Bank, while
the other wing is the
financial policy entrusted to the Ministry of Finance, and
the two policies must always be in harmony."
war finance
For his part, lecturer at the American University, Hani Genena, says,
“Before the inauguration of central banks, private commercial banks were responsible for issuing their own (cash) banknotes as an alternative payment tool for trading gold, silver or copper, but
due to the lack of sufficient control, many incidents occurred. crises, as a result of printing a banknote without a sufficient cover of gold.” He adds,
"Contrary to what many believe, the main reason behind the establishment of central banks, beginning in the 17th century, was not only to supervise banks and organize the printing of money,
but the goal was to finance military spending, given the insufficiency of the state's tax resources during those times.
This funding was It is inflationary financing, because it depends on printing the banknote without a full cover, and forcing people to accept the banknote as a means of payment by force of law. Genena points out that
“in the United States of America, the American Federal Law was issued before World War I in 1913, and the Federal Reserve was established in 1914, and about 30 years before that, the price of the dollar was fixed at $20.67 per ounce of pure gold (about 33 grams), and dollar holders were entitled to Replacing it with gold on demand,” stressing that
“with the outbreak of the First World War and with the Federal Reserve having to print a dollar that exceeds the gold cover, it decided to reduce the exchange rate to $25 per ounce in 1934, and issued a decision prohibiting the circulation of gold as a means of payment among the people, while maintaining the right to Exchange dollars into gold on demand. The lecturer at the American University says that
“from 1934 to 1971, this system continued to work globally, as the dollar was covered in gold and the major currencies were fixed to the dollar,” adding,
“but the entry of the United States into more than one war such as World War II, the Korean and Vietnam wars, in addition to the war The cold war with Russia (the former Soviet Union), and what
these wars imposed of excessive printing of the dollar to finance military spending,
US President Nixon announced at the time the end of the gold cover permanently in 1971 because the Federal Reserve was unable to provide dollars on demand to central banks outside the United States of America. And he continues,
"Since that time, the major central banks have abandoned fixing the exchange rate to the dollar, and the major currencies (the US dollar, the Japanese yen, the German mark, and the British pound) have become free-traded currencies," explaining that
"in the absence of a deterrent to the printing of banknotes (represented in the size of the banknotes). Available gold), the central banks have entered a long phase of experiments to find a new target as an alternative to the exchange rate, and indeed the
central banks have shifted from targeting a fixed exchange rate to targeting a specific rate of inflation, which is approximately two percent. Genena concludes that
"central banks around the world have two main functions, the
first is to ensure monetary stability (maintaining the value of the local currency over time by maintaining inflation rates), while the
second is to maintain financial stability through strict supervision of the banking sector."
“Finance” and “Central” are cat and mouse
"The relationship between finance ministers and central bank governors in the world is always like a cat-and-mouse relationship," says Hani Tawfik, a specialist in macroeconomic affairs. He adds that
"the differences between finance ministers and central bank governors are a classic match between them,
when the central bank raises the interest rate." The indebtedness of the state’s general budget is rising, and the government is the largest debtor, which is known as a conflict of interest.” Tawfiq explains that
"central banks were established with the aim of regulating the issuance and circulation of unified local currencies," and stresses that
"the central bank in all countries of the world has two goals that are not third, which are to confront inflation to help growth and encourage investment," noting that
"in the event of high rates of Inflation uses its tools and raises the interest rate to absorb liquidity and reduce consumption, and demand and inflation decline,
while in the event that inflation rates fall below the target, the interest rate is raised to stimulate investment and encourage borrowing and consumption, so demand increases and inflation rates rise.
How did the idea of central banks appear around the world?
Sweden developed the first plant in 1668 and the goal of its establishment was to "finance military spending" in wars
Mahmoud Abdo Journalist Wednesday 24 August 2022 22:38
The Bank of England building in central London (AFP)
Economic success and growth are always linked to the success of the country's central bank, which formulates monetary policy to be in harmony with its financial counterpart, and
thus a successful economic policy is achieved.
The idea of the central bank is not an original right of the modern era, but it has its roots in ancient and medieval times.
In ancient Egypt, the priest of the temple was not only a religious chief, but was also on a great degree of economic readiness, and in one way or another made his position the beginning of a nucleus It is similar to economic and financial centralization, so it manages people’s livelihood matters, and provides them with assistance in times of distress, calamities, calamities and epidemics.
The faithful guard
The economic writer Zakaria Mahran explains in his book “Central Banks in Different Ages,” that
“the ruler of Venice in the Middle Ages decided to establish the (Wenice of Bank) in 1171, with a forced subscription that he imposed on the rich, and pledged to them to guarantee a profit of at least five percent. annually, then he involved the government with them with money, and made the management of the bank to appoint employees to manage it.” Mahran added,
"This semi-governmental central bank was very successful, which prompted other countries to follow the same approach.
The Saint George Bank and the Bank of Barcelona were established in the 14th century, and
the idea spread from one country to another, until the Dutch took it with the growth of their possession, the activity of their trade and their colonial expansion,
They established in Amsterdam its well-known bank (Amesterdam Bank-Wisselvan) under the auspices of the Dutch government in 1609.
The idea of central banks has developed in the modern era from a mere voluntary decision between countries to the extent that a head of state may step down or overthrow a system and the central bank does not fall.
Then Britain launched its central bank, to be the most famous central bank in the world so far.
And the central bank’s first goal is to
- lend or finance the government, and to
buy the debts that you owe to other parties, and
little by little it has become involved in
- regulating local commercial transactions,
setting a specific ceiling for many financial transactions, and
printing cash circulating in a monopolistic manner,
until the central banks became the center of confidence of citizens and customers
they are The custodian of their money.
Between independence and accountability
But what is the role of central banks in the countries of the world?
And how much independence do you enjoy?
What about the classic disagreement between it and fiscal policy?
The tasks of central banks around the world are numerous, and
perhaps the most prominent facts that governments highlight is the independence of central banks.
The financial advisor and head of the Monetary and Capital Markets Department at the International Monetary Fund, Tobias Adrian, explains in a report on the official website of the International Fund in 2019 that
“in the aggregate it is considered independence Central banks is a relatively new thing.
The idea gained traction in the 1970s, but
it has proven to be an important and stabilizing factor for countries seeking to free monetary policy decisions from political influence.
However, after ten years of central banks playing a pivotal role in the face of the global financial crisis, we find that they are struggling to accomplish the tasks entrusted to them, under difficult circumstances.
From Europe to the Americas, and from Africa to Asia, disaffected voters and their countries are calling for increased bank accountability. Central, and some of them became skeptical about the value of its independence, which was once preserved to the point of sanctity.
Former Egyptian Finance Minister Samir Radwan (the first finance minister after the January 2011 revolution) says,
"The role of central banks in the traditional world in the early beginnings is focused on confronting inflation rates, and
the main mechanism used is interest rates only,
but after the global financial crises in 2008 Other tasks have been added to central banks, as it is targeting a specific growth rate and employment rates,
which is not happening in Arab countries at the present time,
especially in Egypt, as the main goal is to target inflation rates only. Radwan pointed out that
"any country in the world has a targeted economic policy that relies on two wings, the
monetary policy is the competence of the Central Bank, while
the other wing is the
financial policy entrusted to the Ministry of Finance, and
the two policies must always be in harmony."
war finance
For his part, lecturer at the American University, Hani Genena, says,
“Before the inauguration of central banks, private commercial banks were responsible for issuing their own (cash) banknotes as an alternative payment tool for trading gold, silver or copper, but
due to the lack of sufficient control, many incidents occurred. crises, as a result of printing a banknote without a sufficient cover of gold.” He adds,
"Contrary to what many believe, the main reason behind the establishment of central banks, beginning in the 17th century, was not only to supervise banks and organize the printing of money,
but the goal was to finance military spending, given the insufficiency of the state's tax resources during those times.
This funding was It is inflationary financing, because it depends on printing the banknote without a full cover, and forcing people to accept the banknote as a means of payment by force of law. Genena points out that
“in the United States of America, the American Federal Law was issued before World War I in 1913, and the Federal Reserve was established in 1914, and about 30 years before that, the price of the dollar was fixed at $20.67 per ounce of pure gold (about 33 grams), and dollar holders were entitled to Replacing it with gold on demand,” stressing that
“with the outbreak of the First World War and with the Federal Reserve having to print a dollar that exceeds the gold cover, it decided to reduce the exchange rate to $25 per ounce in 1934, and issued a decision prohibiting the circulation of gold as a means of payment among the people, while maintaining the right to Exchange dollars into gold on demand. The lecturer at the American University says that
“from 1934 to 1971, this system continued to work globally, as the dollar was covered in gold and the major currencies were fixed to the dollar,” adding,
“but the entry of the United States into more than one war such as World War II, the Korean and Vietnam wars, in addition to the war The cold war with Russia (the former Soviet Union), and what
these wars imposed of excessive printing of the dollar to finance military spending,
US President Nixon announced at the time the end of the gold cover permanently in 1971 because the Federal Reserve was unable to provide dollars on demand to central banks outside the United States of America. And he continues,
"Since that time, the major central banks have abandoned fixing the exchange rate to the dollar, and the major currencies (the US dollar, the Japanese yen, the German mark, and the British pound) have become free-traded currencies," explaining that
"in the absence of a deterrent to the printing of banknotes (represented in the size of the banknotes). Available gold), the central banks have entered a long phase of experiments to find a new target as an alternative to the exchange rate, and indeed the
central banks have shifted from targeting a fixed exchange rate to targeting a specific rate of inflation, which is approximately two percent. Genena concludes that
"central banks around the world have two main functions, the
first is to ensure monetary stability (maintaining the value of the local currency over time by maintaining inflation rates), while the
second is to maintain financial stability through strict supervision of the banking sector."
“Finance” and “Central” are cat and mouse
"The relationship between finance ministers and central bank governors in the world is always like a cat-and-mouse relationship," says Hani Tawfik, a specialist in macroeconomic affairs. He adds that
"the differences between finance ministers and central bank governors are a classic match between them,
when the central bank raises the interest rate." The indebtedness of the state’s general budget is rising, and the government is the largest debtor, which is known as a conflict of interest.” Tawfiq explains that
"central banks were established with the aim of regulating the issuance and circulation of unified local currencies," and stresses that
"the central bank in all countries of the world has two goals that are not third, which are to confront inflation to help growth and encourage investment," noting that
"in the event of high rates of Inflation uses its tools and raises the interest rate to absorb liquidity and reduce consumption, and demand and inflation decline,
while in the event that inflation rates fall below the target, the interest rate is raised to stimulate investment and encourage borrowing and consumption, so demand increases and inflation rates rise.
