Money: Understandings and Misunderstandings

Preface
Contents
List of Figures
List of Tables
1 Why Another Book About Money?
	1.1 From Bands of Hunter-Gatherers to Farmers
	1.2 The Need to Invent a Numeraire: The Functional Limits of Barter Exchange
	1.3 Overcoming Brain Limitations
	1.4 Misunderstandings Run Deep
	1.5 Our Reptilian Brains
	1.6 The Desire to Hold onto Something Solid
	1.7 What to Expect in Chapters to Come
	Works Cited
2 Imagine a World Without Money
	2.1 A Scene from Downtown Modelville
	2.2 Barter, Again
	2.3 Enter Money!
3 A Brief History of Money
	3.1 Categories of Money
	3.2 About 11,000 Years Ago
	3.3 Modelville in the 1500s
	3.4 Paper Currency in the United States
	3.5 The Creation of the Federal Reserve System
	Works Cited
4 Saving, Lending, Borrowing, and the Banking Sector
	4.1 Saving, Borrowing, and Lending
	4.2 The Creation of Money
		4.2.1 Fractional Banking and Money Creation
		4.2.2 What Could Go Wrong?
	4.3 Borrowing Short and Lending Long
		4.3.1 Illiquidity Versus Insolvency
	4.4 Perils of 100 Percent Reserve Banking
	4.5 Optimal Quantity of Money
		4.5.1 Prices Serve as Signals
		4.5.2 Overall Price Level, Inflation, Deflation, and Disinflation
		4.5.3 Who Decides and How
	Works Cited
5 Central Banks, Monetary Policy, and the Economy
	5.1 A Brief History of the Federal Reserve System
		5.1.1 The First Bank of the United States
		5.1.2 The Second Bank of the United States
		5.1.3 The Independent Treasury Bill
		5.1.4 National Monetary Commission and the National Reserve Association
	5.2 The Federal Reserve System
		5.2.1 Structure of the Federal Reserve System
			5.2.1.1 The Board of Governors
			5.2.1.2 Federal Reserve Banks
			5.2.1.3 The Federal Open Market Committee
	5.3 Monetary Policy
		5.3.1 Tools of Monetary Policy
			5.3.1.1 Changes in Required Reserve Ratio
			5.3.1.2 Changes in Discount Rate
			5.3.1.3 Open Market Operations
			5.3.1.4 Interest Payment on Required and Excess Reserves
		5.3.2 The Interaction of Money Supply and Money Demand
	5.4 The Impact of Changes in Money Supply on the Economy
	5.5 The Yield Curve
		5.5.1 The Expectations Theory
		5.5.2 The Segmented Markets Theory
		5.5.3 The Liquidity Premium Theory
	Works Cited
6 The Financial Crisis of 2007–2009 and the Great Recession
	6.1 Monetary Policy and the Economy
		6.1.1 A Business Cycle
	6.2 The Financial Crisis of 2007–2009 and the Ensuing Great Recession
		6.2.1 A Timeline of the 2007–2009 Financial Crisis
		6.2.2 Subprime Lending
		6.2.3 Housing Boom and Bust
		6.2.4 Findings of the Studies by the Congress and the Senate
	6.3 The Response of the Federal Reserve System
		6.3.1 The Zero-Lower-Bound
		6.3.2 The Yield Curve Again
		6.3.3 Quantitative Easing (QE)
	6.4 Did the Unconventional Monetary Policy Work?
	6.5 Modern Monetary Theory
		6.5.1 Functional Finance Doctrine
	6.6 Back to the Modern Monetary Theory
	Works Cited
7 Economic Growth and the Role of Money
	7.1 What Is Economic Growth?
		7.1.1 What Is Gross Domestic Product?
			7.1.1.1 The Expenditure Approach
			7.1.1.2 The Income Approach
			7.1.1.3 The Value-Added Approach
		7.1.2 Nominal Versus Real GDP
			7.1.2.1 Calculating Nominal and Real GDP
		7.1.3 GDP Deflator and Consumer Price Index: Measures of Aggregate Price Level
		7.1.4 Some Concerns About GDP Calculations
	7.2 Factors Affecting Economic Growth
		7.2.1 Technology
		7.2.2 Specialization and Trade
		7.2.3 Human Capital
		7.2.4 The Role of Institutions
	7.3 What Does Money Have to Do with All This?
	Works Cited
8 Money in an Interconnected World
	8.1 An Interconnected World
	8.2 Money and International Trade
	8.3 The Determinants of Trade Patterns
	8.4 What Are Exchange Rates and Why Do We Need Them?
		8.4.1 Spots, Forwards, Swaps, Futures, and Options
		8.4.2 Foreign Currency as a Store of Value
			8.4.2.1 Liquidity
			8.4.2.2 The Expected Rate of Return
		8.4.3 The Exchange Rate Equilibrium
	8.5 The Effects of the Foreign Central Bank Action on the Domestic Economy
		8.5.1 Changes in Money Supply, Interest Rates, and Exchange Rates
		8.5.2 Changes in Money Supply, Price Level, and Exchange Rates
	8.6 Common Currency Areas
	Works Cited
9 Some Concluding Thoughts
	9.1 A Longing for Gold
	9.2 A Longing for the Tangible
	Works Cited
Index