Discussion — Lectures 3 & 4

This session covers Lecture 3: Money and the State: Domestic and Lecture 4: The Money View, Micro and Macro.

• Lecture 3 Notes
• Lecture 4 Notes

Lecture 3 builds on last week's Allyn Young reading in discussing the history of the US monetary system from the Civil War through the national banking system's evolution into the Fed. We get some practice using balance sheets to describe historical banking structures and events, and we contrast the central bank's role as banker's bank (holding the reserves of the banking system) with its role as a government bank (lending to the government).

Lecture 4 more deeply examines the idea of liquidity and the asymmetry of the settlement (survival) constraint in which everybody must meet their cash commitments as they come due. The lecture emphasizes lining up cash flows and cash commitments in time, and introduces the sources and uses notation to help us disaggregate different categories of liquidity.

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