Issues in Money and Banking

Issues in Money and Banking

Issues in Money and Banking

Issues in Money and Banking

Synopsis

Today's banking systems, from prosperous America to muddled Europe and wobbly Japan, may be in worse shape than is generally assumed. Although large financial institutions face the challenges of the new Euro with confidence, smaller banks are not as well prepared to deal with the world's changing financial scene. While most banks' profits continue to come from lending, many have accepted lesser borrowers, and others have entered businesses, such as asset management, that could become less attractive. Given the pressure on banks to earn more profits and the extra risks they have taken, it behooves us to revisit the key issues in banking. This book casts the ongoing changes in money and banking into perspective.

Excerpt

The purpose of this book is to cast into perspective the ongoing changes in money and banking. In order to draw on a wider audience, the study restricts itself as much as possible to nontechnical language, although on a number of issues such language is difficult to avoid. It is important, after all, that people, other than specialists, have more than a nodding acquaintance with issues that have profound implications for both the domestic and world economy.

The issues discussed in this study are long-standing. Some have their antecedents in distant history and others are more recent. They are all tied by society's use of money. There is, moreover, no guarantee that these issues in money and banking will follow a given script. For instance, financial institutions are rushing to meet the challenges of Europe's new "euro" currency. The world's big banks are confident that they can greet the euro without undue strains on their activities. More worried are small- and middle-sized banks, which are generally less prepared to deal with new developments on the world's financial scene.

Most American banks' profits continue to come from lending. Many banks have also become exposed to lesser borrowers; as a result they are likely to suffer bad credit losses. Another likely source of trouble for banks is that some of the businesses they entered, such as asset management and trading, may well become much less attractive.

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