Money and Banking: What Everyone Should Know

Course No. 5630
Professor Michael K. Salemi, Ph.D.
University of North Carolina, Chapel Hill
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Course No. 5630
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Course Overview

From the invention of coins by the ancient Lydians to the 21st-century eurozone, human history tells the story of ingenious financial systems and the never-ending quest for economic solutions. Today, our global economy is both fascinating and dizzyingly complex—challenging even experts to comprehend it fully. But one thing remains clear: Money and finance play a deeply fundamental role in your life.

Money is a social contract that affects the decisions of nations and individuals. Our financial institutions drive our political systems and the growth of nations. And money and banking are indispensable in both your daily financial transactions and your most essential long-term plans. A working knowledge of money and banking systems is critically useful in several ways:

  • It helps you understand the complex and often bewildering world of finance.
  • It helps you to "read" the current economic climate, to make sense of what you see in the media, and to gauge where the economy is headed.
  • It gives you key insights into society and the economic issues in life.
  • It allows you to comprehend integral aspects of history and the way civilization developed.
  • Perhaps most important, it helps you to plan your own life and to make key financial decisions for yourself and your family.

Speaking to all of this in Money and Banking: What Everyone Should Know, economist and award-winning Professor Michael K. Salemi of The University of North Carolina at Chapel Hill leads you in a panoramic exploration of our monetary and financial systems, their inner workings, and their crucial role and presence in your world. In 36 incisive and detailed lectures, he gives you a penetrating look at the financial institutions that are fundamental to your life and well-being. Beginning with the colorful history of money, including the monetary history of the United States, you investigate pivotal topics, including

  • the crucial role of public confidence in the stability of our financial system;
  • how money is created by commercial and central banks;
  • how "Wall Street" and "Main Street" are inextricably intertwined, each requiring the success of the other;
  • the dramatic history and causes of hyperinflation;
  • the uses of "local" currencies and nontraditional monetary systems;
  • the thorny problem of financial firms that are deemed "too big to fail," and why being named "TBTF" gives firms an incentive to engage in risky investments;
  • the irrational psychology of stock market "bubbles," in which investing becomes speculative gambling; and
  • why the value of the dollar depends on interest rates elsewhere in the world.

Dr. Salemi reveals all of this and more as a great and rousing human story, with remarkable details of how financial systems came into being, the problems they're designed to solve, and how they've evolved and changed. While those with knowledge of economics will find rich depth in these lectures, the course is also a welcoming entry for those with no background in finance.

Explore the Core Institutions of Economic Life

As a guiding theme of the course, you observe the ways in which economies require efficient and evolving financial institutions and markets to fulfill their potential. In building a full view of our financial system, you delve into these vital subjects:

  • Central banks and the Federal Reserve: You learn in depth about the roles and functions of central banks, how they oversee economies and control money supply, and what makes the Fed and the European Central Bank the most powerful financial institutions in the world.
  • Commercial banks: You study the operation of commercial banks and other depository institutions, their asset structure, the services they perform, and the important benefits they provide for depositors, savers, and borrowers.
  • Interest rates and interest rate policy: Five lectures are devoted to the broad subject of interest rates—the economic forces that determine them, their effects in both national and international finance, and how they impact investing and borrowing.
  • Bond and stock markets: You investigate what securities markets offer to investors and the issuers of securities, the ins and outs of stock pricing and bond yields, and why these markets play an essential role in economies.
  • Monetary policy: You study the function of monetary policy on the part of governments, central banks, and the International Monetary Fund in stabilizing economies, intervening in crises, and overseeing the world financial system.
  • Foreign exchange and international banking: You explore topics such as the factors governing currency exchange, how exchange rates affect international trade, and why international banking is a crucial feature of globalization.

Grasp the Workings of a Global System

Across the arc of Money and Banking, you tackle key topics that shed light on the functioning of our financial system as a whole.

Early in the lectures, you study the critical subject of inflation and its relationship to the consumer price index and to excess money growth. You also investigate the causes and implications of the federal deficit and the national debt. Economic growth, it turns out, is directly related to investment in a nation's "capital stock"—the buildings, equipment, and human resources used in the production process.

In the international arena, you learn what happens when a nation imports more than it exports, and the implications of trade deficits in global economic relationships. You consider the important matter of how central banks steer clear of political pressures and the question of monetary policy coordination between nations, weighing the significant benefits to the global economy of cooperation between central banks.

A Dynamic and Multilayer Resource for Learning

Professor Salemi brings these lectures alive with the flair of a provocative and thoroughly engrossing storyteller. An expert in economic education, he communicates the principles of finance as compelling lessons in human ingenuity, showing you vividly how each economic innovation responds to real-life challenges and dilemmas. You engage with detailed case studies, historical incidents, and current events in understanding topics ranging from investment decisions and the regulation of financial firms to the system of "floating" currency exchange rates.

You also study the underlying logic and meaning of financial concepts and the mathematical formulas that express them if you are interested in learning more about the mathematical dimension of money and banking. In addition, Professor Salemi amplifies the lectures with diagrams, graphs, and animations that clearly illustrate the course content. These helpful visual aids are also included in the course guidebook, so audio listeners can consult and take advantage of them as well.

Essential Knowledge for Living

In Money and Banking: What Everyone Should Know, Professor Salemi offers you the rare chance to gain a grounded understanding of our monetary and financial systems in 36 content-rich lectures. This core knowledge is permanently useful, both in comprehending economic systems at home and abroad and in making informed financial choices for yourself.

Take this opportunity to grasp the vital elements of finance that directly affect our way of life, our national concerns, and your own life and future.

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36 lectures
 |  Average 30 minutes each
  • 1
    The Importance of Money
    What is money? Consider the fundamental nature of money as a social contract and a social institution that coordinates economic activity. Explore the connections between financial institutions and economic well-being, including the importance of "stable value money" to trade and the critical roles of healthy banks, efficient asset markets, and monetary policy. x
  • 2
    Money as a Social Contract
    Money developed as a medium of exchange to facilitate trade. Here, learn about five stages in the evolution of money. Beginning with barter, trace the rise of commodities as money, the invention of coins, paper money backed by precious metals, and finally our era's "fiat" money, which has value by agreement alone. x
  • 3
    How Is Money Created?
    Study the invention of paper money in the history of goldsmiths issuing paper receipts backed by gold deposits. Then trace the important history of the gold standard, upon which nations pegged the value of currencies, and the reasons the gold standard was abandoned in 1971. x
  • 4
    Monetary History of the United States
    The U.S. government's role in financial affairs has been historically controversial. Learn about the two failed attempts in early U.S. history to establish a central bank, followed by the system of "national" banks chartered in the 1860s. Follow key issues surrounding national currency and coinage, leading to the Federal Reserve Act of 1913. x
  • 5
    Local Currencies and Nonstandard Banks
    Finance is not just the business of the wealthy. Here, study nontraditional models for solving economic problems, from examples of local currencies galvanizing local economies to "microfinance" arrangements such as Bangladesh's Grameen Bank, which create highly successful savings and loan programs for the poor. x
  • 6
    How Inflation Erodes the Value of Money
    This lecture investigates the factors governing inflation, beginning with an inflation history of the United States over the last century. Learn about the correlation between inflation and the consumer price index, and how inflation is triggered by excess money growth. Also, review inflation's detrimental effects and costs. x
  • 7
    Hyperinflation Is the Repudiation of Money
    The history of hyperinflation offers both a compelling story and a cautionary tale of inflation's damaging effects. Trace the root causes of extreme inflation in governments that finance deficits by printing new money. Then, study key cases of hyperinflation, its "vicious circle" quality, and the inevitable fiscal reform that ends it. x
  • 8
    Saving—The Source of Funds for Investment
    Explore the meaning of "investment" in economics as increases to a nation's "capital stock"—the equipment, technology, and human resources used in the production process. Then see how investment is made possible by domestic saving and foreign borrowing, and how investment is critically related to economic growth. x
  • 9
    The Real Rate of Interest
    Understanding how interest rates work sheds important light on our economy. Study the difference between the "nominal" or agreed-upon interest rate in a loan transaction and the "real" rate of interest. Learn how the "real" rate factors in the rate of inflation to determine the actual cost/benefit of borrowing and lending. x
  • 10
    Financial Intermediaries
    Financial intermediaries or "middlemen" play an important role in modern economies. Investigate how intermediaries such as commercial banks facilitate borrowing and lending, which provide valuable services to each party. Afterward, study the fundamental types of intermediary institutions, including savings banks, mutual funds, money market funds, and insurance companies. x
  • 11
    Commercial Banks
    In learning how commercial banks operate, examine the sources from which banks acquire their funds and how they use the funds they acquire, as well as how assets and liabilities function within banks. Finally, study three formal definitions of money, and how banks literally create money in the process of making loans. x
  • 12
    Central Banks
    Investigate the role and importance of central banks as they provide banking services to commercial banks, focusing on the U.S. Federal Reserve. See how central banks control an economy's interest rates and create money, and how their ability to increase or decrease the money supply makes them the world's most powerful financial institutions. x
  • 13
    Present Value
    Present value is an important formula for computing the current value of payments that will be received or made in the future. Learn how present value is used, in the examples of determining the current value of a savings bond and how much to save per year for future college tuition. x
  • 14
    Probability, Expected Value, and Uncertainty
    This lecture explores how financial decisions are made in the face of future uncertainty. Using the examples of both a dice game and a real-world business strategy, study the statistical tool of "expected value" as a method of predicting possible outcomes. See how the probability of expected profits influences business decisions. x
  • 15
    Risk and Risk Aversion
    Economists have developed ways of assessing people's willingness to take on risk in financial decision making. With reference to the "St. Petersburg Paradox," a classic problem relating to odds in gambling, observe how individuals tend to value the dollars they might lose more highly than the dollars they might win. x
  • 16
    An Introduction to Bond Markets
    Bond markets play a key economic role by channeling funds from savers to government and private entities that need funding beyond their current revenues. In this lecture, study the various types of bond instruments, including Treasury bills, notes, and bonds. Learn also about important factors underlying the federal deficit and the national debt. x
  • 17
    Bond Prices and Yields
    In a deeper look at bonds, investigate how secondary markets for bonds operate and what they offer investors. Study fundamental concepts including the "yield to maturity" of bonds and the "holding period yield" in understanding the link between bond prices and interest rates and how economic events change them. x
  • 18
    How Economic Forces Affect Interest Rates
    Changes in interest rates have widespread economic effects. Consider interest rates as market prices, set by the current market for credit. Then see how interest rates are determined in the long run by patterns of saving and investment, and in the short run by factors such as government deficits and recessions. x
  • 19
    Why Interest Rates Move Together
    The many interest rates in different areas of the economy tend to change together over time. Here, learn about the key factors that govern this, beginning with the ways that interest rates adjust to expected changes in inflation. Observe also how risk in borrowing and lending affects the rate of interest. x
  • 20
    The Term Structure of Interest Rates
    The formula known as the "Expectations Hypothesis" allows analysts to forecast future interest rates and conditions in the credit market. Understand the intuition behind the hypothesis, study the formula itself as it tracks yields on Treasury securities, and see how it benefits borrowers considering mortgages and loans. x
  • 21
    Introduction to the Stock Market
    Stock markets provide individuals the chance to share in the ownership and profits of corporations. Investigate the history of stock markets, their basic functions on behalf of investors, and how trades are made. Finally, learn about the various stock indexes that track the markets, and how mutual funds operate. x
  • 22
    Stock Price Fundamentals
    What determines prices in the stock market? Approach this question first through the "market fundamentals" model of stock prices, a formula linking a firm's capital, profits, and dividends to its share price. Contrast this with the "capital asset pricing model," which evaluates the rate of return an investor requires. x
  • 23
    Stock Market Bubbles and Irrational Exuberance
    This lecture introduces the fascinating group psychology of stock investing. Study the phenomenon of stock market "bubbles," in which prices are driven up without reference to profitability data. Then, grasp the "bubble" mind-set, which triggers speculative buying and selling based only on what others are paying. x
  • 24
    Derivative Securities
    Derivative securities play an important role in finance by allowing business decision makers and private investors to lower risk. See how derivative securities are created using underlying products, and study the major types of derivatives and how they function, including stock options, commodities futures, mutual funds, and "collateralized" debt obligations. x
  • 25
    Asymmetric Information
    Asymmetric information occurs when one party in a financial transaction has more relevant information than another. Learn how this affects financial markets; in particular, the challenges it presents for borrowers and lenders. Also, discover why so few firms issue stocks and bonds, and why banks are so restrictive in regard to loan practices. x
  • 26
    Regulation of Financial Firms
    Consider the case for government bailouts of financial firms, and why such actions are in the public interest. Then examine the types of government regulation of financial institutions, and see how the 20th-century history of bank regulation was a "tug of war" between looser and stricter rules. x
  • 27
    Subprime Mortgage Crisis and Reregulation
    The subprime mortgage crisis of 2008 offers a clear example of breakdown followed by regulatory reform. Trace the dramatic events that led to the crisis, and learn about the mortgage-backed derivative securities that contributed to it. Finally, examine the provisions of the Dodd-Frank Act, designed to address the crisis's causes. x
  • 28
    Interest Rate Policy at the Fed and ECB
    Interest rate policy is fundamental to the role and function of central banks. Investigate how the Federal Reserve raises and lowers short-term interest rates in pursuing its objectives of stabilizing prices and promoting a healthy economy. Compare the Fed's policies with the European Central Bank's, noting key similarities and differences. x
  • 29
    The Objectives of Monetary Policy
    This lecture asks the question: What should the objectives of a government's monetary policy be? Explore the ways in which monetary policy on the part of central banks affects economies. Study the monetary policy mandates of several different nations, and consider whether the Fed's own dual mandate may be too broad. x
  • 30
    Should Central Banks Follow a Policy Rule?
    The question of policy rules versus policy "discretion" highlights how central banks operate. Examine the case favoring predictable policy by the Fed in addressing economic events, compared with treating each event as unique. Evaluate the claim that the Fed followed a specific policy rule during the term of Alan Greenspan. x
  • 31
    Extraordinary Tools for Extraordinary Times
    Responding to the Great Recession of 2008, the Federal Reserve took unprecedented actions to address the crisis. Here, observe how the Fed intervened in credit markets, provided remedies for banks, and stimulated the economy, and consider the question of whether its actions went too far, paving the way for future inflation. x
  • 32
    Central Bank Independence
    Traditional thinking says that central banks must be independent of political pressures in order to best perform their function. Learn how economists define and measure "independence" and "transparency" of the central banks of the world. Investigate whether greater independence of central banks is associated with desirable economic outcomes. x
  • 33
    The Foreign Exchange Value of the Dollar
    Turning to international finance, grasp how currency exchange rates operate based on demand and supply, and how this system accounts for the devaluing of the U.S. dollar over the last two decades. Also study China's exchange system, which pegs its currency to the U.S. dollar, and its implications for the global economy. x
  • 34
    Exchange Rates and International Banking
    Understanding the movement of exchange rates gives key insight into international banking relationships. Investigate the factors that determine exchange rates in both the short and long run, and learn how economists evaluate currencies as over- or undervalued. Observe how international banks play an ever-increasing role in finance, and why this is so. x
  • 35
    Monetary Policy Coordination
    The coordination of monetary policy between nations has important effects on the world economy. Using specific examples, evaluate the benefits of coordinated interest rate policy versus the outcomes of given nations acting alone. Learn about the International Monetary Fund, its functions, and the role it plays in maintaining worldwide financial stability. x
  • 36
    Challenges for the Future
    In concluding, consider three key questions facing the world's financial systems: Will the United States solve its chronic deficit problem? Will the euro survive? And will financial regulators find a solution for the "too big to fail" problem? Examine the complex challenges posed by these issues and their critical implications for our economic future. x

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Your professor

Michael K. Salemi

About Your Professor

Michael K. Salemi, Ph.D.
University of North Carolina, Chapel Hill
Dr. Michael K. Salemi is Professor of Economics at The University of North Carolina at Chapel Hill. He completed undergraduate studies in economics at St. Mary's College in Winona, Minnesota, master's degrees in economics from Purdue University and the University of Minnesota-Minneapolis, and a doctorate in economics from the University of Minnesota-Minneapolis. Professor Salemi has received numerous teaching awards from...
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Money and Banking: What Everyone Should Know is rated 3.9 out of 5 by 61.
Rated 2 out of 5 by from 36 lecures, but the lecturer speaks v-e-r-y s-l-o-w-l-y. At normal lecture pace, eliminating the out-of-date name-dropping and tightening up the script, about 24 lectures. Presented at about a Grade 8 level, I hope that's not what a typical economist thinks of "everyone". Some explanation of jargon, but very unsophisticated, pretty much useless for understanding real world economic policy debates. It's easy to see why it's called the "Dismal Science". At least the lecturer doesn't use the word "honesty" in his Wall Street and political hagiography. Not recommended for people looking for a university-level course.
Date published: 2020-07-17
Rated 1 out of 5 by from Pedantically slow and somewhat convoluted While I've enjoyed your other courses, this one fell short of my expectations and needs. The course lacks a certain continuity. While it starts with the Big picture, there is no development of the context of the course. There is just a dive into individual topics, that from a beginners view, appear disjoint and unrelated. There's also the unresolved abstraction that is Money, and why it was tied so strongly to gold. And now, somehow, it's energized by a global flow of Trust and Confidence (interesting coincidence that Dow and Tao sound the same). Some elaboration here might create the context I'm looking for. Several other Primary Concepts seemed equally mysterious and foggy. Understandably, it's sometime difficult for an expert like Prof Salemi to “bring it down” to the novice level. Concepts and theory that may seem obvious over time begin as fuzzy ideas – otherwise, they wouldn't need to be taught! And finally, the presentation style seemed overly pedantic and slow. This, in my opinion, was heightened by an aggressive overuse of humor that he enjoyed, perhaps more than his audience. The anecdotal stories, while humanizing, only tended to exacerbate the situation. I realize this is probably a difficult course to teach because Money is the ultimate abstraction. We make something out of nothing and build great Empires upon It. Maybe that's why none of them last!?
Date published: 2020-07-14
Rated 5 out of 5 by from Good Basic Course While a little old, most of the information here is so fundamental it wouldn't change much if it was released today. And the point of fed increasing monetary supply only causing inflation assumes full employment is applicable today. Only complaint I have is the professor speaks a little slow so I play at 1.3x, other than that great course and would recommend for anyone looking for a good grounding in finance.
Date published: 2020-07-09
Rated 5 out of 5 by from Clear explanations After watching the first 16 lectures I am very pleased with the clear explanations Prof. Salemi gives. Learning so much. Looking forward to the remaining lectures. It has been fun watching the professor get more comfortable with the "classroom" setting from which he lectures.
Date published: 2020-04-29
Rated 5 out of 5 by from Wonderfully taught. Easy to Understand Professor Salemi does a wonderful job of explaining the Money and Banking system. His explanation of investment vehicles (bonds, etc.) is very easy to understand and invaluable to anyone investing in financial products. I would suggest that any investor seriously consider this product, particularly those early into their investment process.
Date published: 2020-03-06
Rated 5 out of 5 by from Excellent Professer Salemi is very good. I notice that there are many objections to his rate of speech. This is a spurious criticism because he actually moves quickly over complex topics. I found this course informative and worthwhile. What I object to is that occasionally he mentions a reference which does not appear in the Course Guidebook. For example, he mentions a 'Campbell and Goldfarb' article in Lecture 33 but the citation cannot be found. Also, graph reading would be more easily understood if the 'x' axis were referred to as an increasing independent variable in relation to the dependent variable on the 'y' axis.
Date published: 2019-08-31
Rated 1 out of 5 by from Way Too Slow! The professor seems enthusiastic about the subject, and I'm sure he's very knowledgeable. But his speech rate is painfully slow, so slow that I find it extremely difficult to follow him. Pauses between words are long; pauses between sentences are even longer. Over the years, I've run into people who spoke so quickly that I could not understand them. This is my first experience with someone speaking so slowly that I have trouble following. For me, the lectures are more like long lists of words than meaningful sentences and paragraphs. It is just taking way too much effort to follow. I got about half-way through the first lecture and gave up. I got about as far in the second lecture before doing the same. I then jumped around to a number of the later lectures but found the instructor's speech rate in all of them to be consistently way too slow for me. If the course were close captioned, I would turn off the sound and just read the captions, but it isn't. I'm not willing to spend another twenty bucks to get the course transcript. Other reviewers commented on the professor's slow speech, but others also recommended the course as being of value for neophytes in the subject matter. I've never taken an econ or financial course in my life and know almost nothing about money and banking work. So I decided to take a chance on the course, especially given The Teaching Company's great return policy. I very much wanted to like the course, but there's simply no way I'll ever be able to plow through it. I will be returning it and will look for an introductory book on the subject instead.
Date published: 2018-06-30
Rated 3 out of 5 by from Appropriate I bought this as a gift for my grandson who has recently started working as a banker. Although it was informative, I was disappointed to find out that there have been TWO Federal Reserve Chairmen to serve since the DVD was made. Great Courses should publish the YEAR of production!
Date published: 2018-06-14
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