Financial systems and economic crises

1. Commercial banks deal directly with individuals and firms (deposits, loans).
2. The Central Bank manages the national currency, sets interest rates, and supervises commercial banks.

💡 À retenir : The Central Bank is the "bank of banks" and ensures monetary stability.

1. L'inflation ($\pi$) diminue le pouvoir d'achat de la monnaie.
2. Si le taux d'intérêt nominal est $i$ et l'inflation est $\pi$, le taux d'intérêt réel est $r = i - \pi$.
3. Si $\pi > i$, l'épargne perd de sa valeur réelle.

💡 À retenir : L'inflation érode la valeur réelle de l'argent épargné.

1. It is a loan granted to borrowers with a poor credit history.
2. These loans carry higher risk of default.
3. In 2008, the massive default on these loans triggered a global financial crisis.

💡 À retenir : Subprime = high-risk lending.

1. C'est la propagation d'une crise d'un pays ou d'un secteur à un autre.
2. Elle se fait via les marchés financiers interconnectés ou la baisse de confiance des investisseurs.

💡 À retenir : La mondialisation rend les économies interdépendantes, facilitant la contagion.

1. To monitor the global financial system.
2. To provide financial assistance (loans) to countries facing balance of payments crises.
3. To promote international monetary cooperation.

💡 À retenir : The IMF acts as a global financial stabilizer.

1. Par le développement d'instruments financiers complexes (ex: dérivés) difficiles à évaluer.
2. Par le trading à haute fréquence qui peut créer des krachs boursiers soudains.

💡 À retenir : L'innovation sans régulation augmente l'instabilité.

1. A monetary policy where the Central Bank buys government bonds.
2. It aims to inject liquidity into the economy.
3. It is used when interest rates are already near zero.

💡 À retenir : QE is "printing money" to stimulate the economy.

1. A market condition where stock prices are falling.
2. It is usually accompanied by widespread pessimism among investors.

💡 À retenir : Bear = falling prices; Bull = rising prices.

1. High interest rates make borrowing expensive, reducing company profits.
2. Investors shift money from stocks to safer bonds.
3. Consequently, stock prices usually drop.

💡 À retenir : Inverse relationship between interest rates and stock prices.

1. A system where the value of a currency is directly linked to gold.
2. It limited the ability of governments to print money freely.

💡 À retenir : It is a historical monetary system, no longer in use today.

1. Deficit is the annual gap between spending and revenue.
2. Debt is the accumulation of all past deficits.

💡 À retenir : Deficit = Flow (per year); Debt = Stock (total).

1. Rules imposed by authorities to ensure banks are stable.
2. It includes capital requirements (Basel accords).

💡 À retenir : Regulation prevents excessive risk-taking by banks.