Essay About Limits Of Central Banks And 26Article Analyses

Mervyn King on the Limits of Central Banks – Podcast
Zhongnan JiangFin 456Professor HoxhaMarch.26Article Analyses 1    The article that I choose is “Mervyn King on the Limits of Central Banks – Podcast.” And it is posted in WSJ. The article talks about It’s time for people to stop looking to central banks to solve all the world’s problems. The former governor of the Bank of England talks about the banking system has been practicing a kind of alchemy – the idea that through fractional-reserve accounting, banks can turn risk into safety. When confidence fails, people do want their money back, and central bank then has to bail out the commercial banks. So he wants a system where the banks have to take out insurance before they can even engage in banking, much like motorists have to take out insurance before they can drive.       The reason why I choose that article because it talks a lot of information about Central Banks. The article also talks about relationship between Central Banks and commercial banks. For our class, we have study Banking Background, The Role of the Central Bank and Commercial Banking in Chapter 3, 4 and 5. We also visit Bank of England and CitiBank during London Trip.     I totally agree with Mervyn King. It is not a good idea that when confidence fails, people want their money back and central bank have to bail out the commercial banks. Commercial should have their own method to save themselves. Like have a insurance system to protect if many people want their money back at same time.The link for article::