X100…Engagement 
 #5


Chapter 15


Money & Financial Systems
9/19/16











 Counting Stars Lyrics
Take That Money Watch it Burn
Rephrase…Print That Money Watch it Burn

No Physical Backing…1971 Viet Nam War Funding

President Nixon Removed Gold Standard

Everything That Kills Me Makes Me Feel Alive

 Thought to Ponder
Why is a shift from a service/technology economy to
a knowledge/innovation & technology economy so
important to the US & in particular the USA middle
class?
The Two Keys To Enduring Economic Strength:
Strong Profits & Wage Growth

Labor rates are less of an issue in knowledge/innovation & technology economy…new skills
new Skills pay levels…rebuilding the middle class…the consumption engine of an economy.
 X100
Headlines/News
Exam #2…10/5…Wednesday
Covers the Engagements & Chapters 15, 11, 12, 13 & Moneyball Engagements

55 Multiple Choice + Bonus Questions Earned

 


Despite a recent surge in productivity growth…the United States

now ranks 11 th in the world vs. 1 st in 1973.

This drop is significant…productivity growth is perhaps the best

single indicator of a nation’s economic health.

Our general conclusion is that, in far too many

instances, the United States is attempting to implement
tomorrow’s competitive strategies with yesterday’s
managerial ideas.
 Is Traditional Business Leadership
At A Results Tipping Point?
USA is in slow decline, just slow enough to pretend…or believe…no decline is
taking place.
Thomas Freidman

Why once successful companies fail…they are too confident that what has worked
in the past will continue to work in the future.
Gary Corkin

The speed of change in the future will crush the ill prepared.
Douglas Rushkoff

Not changing with the times is a top reason for company failures.
Rick Suttle

In far too many instances, the USA is attempting to implement tomorrow’s

competitive strategies with yesterdays managerial ideas.
The New American Workplace…James O’Toole & Edward Lawler III

Traditional business as usual is suicidal. (Using a 1920 model to prepare for 2020)
Corporation 2020…Pavan Sukhdev
 The 3 Functions of Money
Medium of exchange -- Accepted as payment for products.

measure of value -- Single standard for assigning & comparing

values of products.

storage of value -- Means of retaining/accumulating wealth.

 The Characteristics of Money

• acceptability. (Use Anywhere)

• Divisibility. (Convenient monetary Units)
• portability. (Easy to Carry)
• Stability. (stable Values)
• Durability. (Lasts a long time)
• Difficulty to counterfeit.

Are credit & debit cards money?

 









In most economies in the world today – what is the formal medium of exchange?







Money/Currency!




What
 currency is the global standard? US Dollar




Every

 nation added to your business increases complexity!




USA Dollar Germany Euro Mexico Peso Canada Dollar

GB Pound Japan Yen Korea Won China Yuan
Belgium Euro Sweden Krona France Euro Finland Euro
India Rupee Argentina Peso Bahrain Dinar Russia Ruble
 Exchange Rates
A wide range of factors interact to determine the
exchange rate level:

1. interest rates.
2. inflation.
3. A country's balance of trade/payments.
4. speculation - expectations about what will happen
in the future.

Over Time in Theory (PPP)

 Need a system to facilitate an

exchange – cannot always be in
person to exchange!

What is this system called?

Banking System/Most Global Industry…

collaboration.
 How banks makes money:
✓ services. (like checking, credit cards, or lock boxes.)

✓ fees. (includes the fees of exchange rates, overdrafts)

✓ Borrow at discount rate. – lend at prime or

sub-prime rate. (The spread)
 Is the bank system government
owned or private ownership?

Depends on the country!

USA – private ownership within the Federal Reserve Structure!

China – Banks are both private & government banks.
 

In addition to facilitate the exchange of
goods and services, how else do banks
stimulate an economy?



CREDIT! 




credit Facilitates Economic Growth!

 Federal Reserve System

The Federal Reserve Board (the Fed) – guardian of the

American financial system. independent agency of the
federal government established 1913 to regulate the
nation’s banking and financial industry.

Who is the current chairman of the Federal Reserve?

Janet Yellen
 Federal Reserve Board.
4 Main Functions!
• Controls the money supply with monetary policy.

• Regulates financial institutions.

• Manages regional and national check-clearing procedures.

• Supervises the federal deposit insurance of commercial

banks in the Federal Reserve system.
 Federal Reserve System Economic Actions
Tools Increase, Grow Decrease, Slow,
Economy Economy
Check Inflation

Open Market buy Gov’t Securities sell Gov’t

Securities

Discount Rate lower Discount Rate raise Discount

Rate

Reserve Requirement lower Reserve raise Reserve

Public Relations positive, Optimistic negative, Pessimistic

Extremely important page – Multiple test questions!

 Insurance for Banking Institutions

Federal Deposit Insurance Corporation. (FDIC)

Insures personal accounts up to a maximum of $250,000. ($100,000 prior to

2008)

Funded by banks paying a % of deposits that are insured.

 Surplus or Deficit!



Annual Spending Exceeds Revenue = deficit

Annual Revenue Exceeds Spending = surplus



Accumulation of annual deficit is National Debt!



Willing to provide but not willing for pain of providing!
Live Time Update National
Debt!

usdebtclock.org 



Your Share Approximately


$60,200
 For those of you born in 1997,

The National Debt has Increased

4.5 times. If the debt increases 

4.5 times in the next 19 years it will
be $ 88 trillion. 


Per person $271,000

 1

Deficits/National Debt matter for

three reasons:



1. Debt leads to spending more on interest… an
escalating cost. 



2. Puts a country at mercy 
 to others countries.




3. Not coming to grips with
 spending that you
cannot afford.