TAILIEUCHUNG - Banks and Banking CHAPTER 16

The way that many neoclassical economists ascribe monetary figures to matters such as education, personal relationships, and the environment, and derive apparently scientific, universal formulae for how they interact is incomprehensible to many and the subject of much concern and debate. 20 Some analysts even argue that this accounting mindset, clearly expressed in the Hamilton and Clemens quote above, is a major cause of our environmental crisis as it demeans our views of our relationships with other people and with nature. 21 As well as these difficulties with putting money values on such issues, and the data and measurement problems acknowledged in. | CHAPTER 16 Banks and Banking O V E R V I E W Most people have or will have a bank account. It might be a savings account or a checking account or both. Those who have bank accounts take for granted that a bank will accept their money for safekeeping and that they can withdraw this money from their accounts whenever they want. We are all familiar with checks. Probably all of us have received a payment for something by check. We hardly give it a thought when we accept a piece of paper with a promise to pay a certain amount. If we open a checking account we have a mechanism for making payments as well as a place to hold our money. Banks serve other purposes besides offering checking and savings accounts. People and businesses borrow from banks actions that are very important in keeping our economy growing. Moreover banks provide many other services such as selling traveler s checks and renting out safe-deposit boxes. In this chapter we will discuss the services that banks provide. We will also discuss the origins of banking the difference between commercial banks and thrift institutions how banks do business how banks create money how we keep our banks safe. 358 Banks and Banking 359 THE ORIGINS OF BANKING As money replaced the barter system in the ancient world the development of banking inevitably followed. History s earliest written records indicate that the people of ancient Babylonia in what is now Iraq in Western Asia developed an early form of currency and banking. The units of Babylonian currency were the shekel mina and talent. A shekel was roughly equal in value to a half ounce of silver. A mina equaled 60 shekels and a talent equaled 60 minas. As early as 2000 . wealthy private citizens and priests of Babylonia granted loans and held funds for safekeeping. Records show that depositors in this ancient culture could draw on their balances held for safekeeping by writing a draft a kind of check . Like bankers today Babylonian bankers charged interest on .

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