Unit 3: The History of Money Markets
This unit examines the origins and evolution of central banking in Europe until the 19th century. This unit claims that the birth of the money market was in 16th century Antwerp, where practices such as discounting and note issuance developed. The Bank of Amsterdam and Bank of England defined central banking. This unit explains how each central bank formed and operated within a layered money system. The Bank of Amsterdam's origins and its crucial innovations are also explained. It also covers the international gold standard and the central bank's role as "lender of last resort". The three-layered monetary system in England during the 19th century is important to understand since the monetary hierarchy increased in complexity during the 20th century.
Completing this unit should take you approximately 2 hours.
3.1: Time Value of Money
This subunit discusses the history of Antwerp's money market during the 16th century. It examines the time value of money, which is essential for understanding discounting and note issuance. It identifies interest rate arbitrage as a foundational force for developing a monetary system.
3.2: Bank of Amsterdam
This subunit explains the founding of the Bank of Amsterdam in light of the Dutch East India Company. It introduces instant settlement and open market operations, privileged lending, and concepts to remember for later units that discuss the Federal Reserve.
3.3: Bank of England
This subunit explains the founding of the Bank of England. During the 18th and 19th centuries, a three-layered monetary system developed in England that became the global model. This section covers the international gold standard and its evolution, and explains it as a layered money phenomenon. This subunit also covers monetary elasticity, financial crises, and the origins of central banks' function as "lender of last resort".
Unit 3 Review and Assessment
- Receive a grade