Money and Banking: What Everyone Should Know

Course Description:
Explore the foundations of money, banking, and financial systems with an economist and award-winning professor. Learn how money functions as a social contract, how banks create and manage value, how central banks influence economies, and how financial crises reshape regulations. From inflation to exchange rates, this course offers essential insights into the systems that shape global prosperity.

Course Outline

01: The Importance of Money
Discover money as a social contract and its role in coordinating economic activity. Explore connections between banks, asset markets, and monetary policy.
31 min

02: Money as a Social Contract
Trace five stages in the evolution of money—from barter to commodities, coins, paper money, and today’s fiat currency backed by agreement alone.
30 min

03: How Is Money Created?
Follow the rise of paper money, the gold standard, and the reasons nations abandoned it in 1971 in favor of fiat systems.
30 min

04: Monetary History of the United States
Review America’s efforts to establish central banks, the rise of national banks, and the creation of the Federal Reserve in 1913.
28 min

05: Local Currencies and Nonstandard Banks
Examine alternative financial models such as local currencies and microfinance, with case studies including the Grameen Bank.
30 min

06: How Inflation Erodes the Value of Money
Study the causes, history, and economic impact of inflation, including its correlation with the consumer price index.
30 min

07: Hyperinflation Is the Repudiation of Money
Learn about hyperinflation’s vicious cycle, its root causes in deficit financing, and historic cases of extreme monetary collapse.
29 min

08: Saving—The Source of Funds for Investment
Understand how investment relies on domestic savings, foreign borrowing, and its role in driving long-term economic growth.
32 min

09: The Real Rate of Interest
Distinguish between nominal and real interest rates, factoring inflation into the true cost and benefit of borrowing and lending.
28 min

10: Financial Intermediaries
Explore the role of financial intermediaries, including banks, mutual funds, and insurance companies, in channeling funds between savers and borrowers.
32 min

11: Commercial Banks
Learn how banks acquire funds, manage assets and liabilities, and literally create money through lending.
30 min

12: Central Banks
Examine the structure and power of central banks, focusing on the Federal Reserve’s role in interest rates and money supply.
29 min

13: Present Value
Master the formula for calculating the current value of future payments, with examples from bonds and tuition planning.
30 min

14: Probability, Expected Value, and Uncertainty
Apply statistical tools like expected value to decision-making under uncertainty in games and business strategies.
29 min

15: Risk and Risk Aversion
Study how people assess and avoid risk in financial contexts, with lessons from gambling paradoxes and economics.
29 min

16: An Introduction to Bond Markets
Understand how bond markets fund governments and private entities, with a focus on Treasury instruments and debt.
31 min

17: Bond Prices and Yields
Analyze the relationship between bond prices, yields, and interest rates in secondary markets.
30 min

18: How Economic Forces Affect Interest Rates
Learn how long- and short-term economic factors—from saving patterns to recessions—impact interest rates.
28 min

19: Why Interest Rates Move Together
See why interest rates across sectors tend to rise and fall together, influenced by inflation expectations and risk.
33 min

20: The Term Structure of Interest Rates
Explore the Expectations Hypothesis for forecasting future rates through Treasury yields and credit markets.
32 min

21: Introduction to the Stock Market
Discover how stock markets function, their history, indexes, and the basics of mutual funds.
30 min

22: Stock Price Fundamentals
Examine models of stock pricing, from fundamentals to capital asset pricing models.
32 min

23: Stock Market Bubbles and Irrational Exuberance
Understand the psychology of bubbles, speculative buying, and market irrationality.
28 min

24: Derivative Securities
Learn how derivatives like options, futures, and CDOs reduce or spread financial risk.
32 min

25: Asymmetric Information
Study how unequal access to information affects markets, borrowing, lending, and bank practices.
29 min

26: Regulation of Financial Firms
Review the history of financial regulation, government bailouts, and the balance between strict and loose oversight.
31 min

27: Subprime Mortgage Crisis and Reregulation
Trace the 2008 crisis, mortgage-backed securities, and the Dodd-Frank reforms.
31 min

28: Interest Rate Policy at the Fed and ECB
Compare how the Fed and ECB manage short-term interest rates to stabilize economies.
31 min

29: The Objectives of Monetary Policy
Debate central bank mandates, including the Fed’s dual goals of price stability and employment.
30 min

30: Should Central Banks Follow a Policy Rule?
Evaluate predictable versus discretionary monetary policy, with lessons from Alan Greenspan’s tenure.
30 min

31: Extraordinary Tools for Extraordinary Times
Examine the Fed’s emergency measures during the 2008 recession and their long-term consequences.
29 min

32: Central Bank Independence
Assess the independence and transparency of central banks worldwide and their economic outcomes.
32 min

33: The Foreign Exchange Value of the Dollar
Understand currency exchange, the dollar’s decline, and China’s peg to the U.S. dollar.
29 min

34: Exchange Rates and International Banking
Analyze how exchange rates are set, how currencies are valued, and the role of international banks.
32 min

35: Monetary Policy Coordination
Learn how nations coordinate monetary policies through institutions like the IMF to ensure global stability.
30 min

36: Challenges for the Future
Conclude with major questions: the U.S. deficit, the euro’s survival, and solving “too big to fail.”
34 min