unit 3.18

Opening Question

• Concept of Apocalypse

  • Scenario presented: Collapse of economy, government, and society.

  • Inquiry: What would be your choice of money in such a situation?

  • Discussion point: Does the reason for collapse (e.g., zombies or a solar flare) affect money choices?

Historical Forms of Money

• Examples of Money Used Throughout History:

  • Shells

  • Livestock

  • Precious stones

  • Human skulls

  • Salt, pepper, spices

  • Furs

  • Human scalps

  • Pearls

  • Wheat

  • Feathers

  • Silver

  • Gold

  • Coins

  • Paper money

Modern Currency

• Commonly Recognized Forms of Currency:

  • Coins and paper money are typically thought of as currency.

Different Kinds of Currency

• Types of Currency Explained:

  • Money:

  • Dollar bills and coins.

  • Checks:

  • A written order directing payment from deposited amounts.

  • Example of a check detailed:

    • Contains information such as payee name, amount, and deposit bank information.

  • Debit/Credit Cards:

  • Used as electronic means to access bank funds or credit.

Vocabulary Terms

• Key Definitions:

  • Money (money supply):

  • Anything generally accepted in payment for goods or services or in repayment of debts.

  • Wealth:

  • The total collection of property that serves to store value.

  • Income:

  • Flow of earnings over time.

Functions of Money

• Key Functions Outlined:

  • Medium of Exchange:

  • Promotes economic efficiency by minimizing time spent in exchanges.

  • Facilitates specialization of labor.

  • Characteristics:

    • Easy to standardize

    • Widely accepted

    • Divisible

    • Easy to carry

    • Not prone to deterioration

  • Historical Example: Cattle were popular due to their utility and value.

  • Measure of Value:

  • Used to measure value of assets, goods, and services.

  • Store of Value:

  • Saves purchasing power over time, with the income functioning as wealth.

  • High inflation can diminish this function.

  • Monies with intrinsic value (like precious metals) are better stores of value.

Evolution of the Payments System-

• Stages of Monetary Evolution:

  • Commodity Money:

  • Items like gold, silver, other precious metals, stones, and even items like cigarettes.

  • Representative Money:

  • 100% backed by precious metals (e.g., banknotes).

  • Fiat Money:

  • Hold no intrinsic value, often just pieces of paper.

  • Checks and Electronic Payments:

  • EFTS, wire transfers are included under electronic payments.

  • E-money:

  • Examples include debit cards used for Point Of Sale (POS).

Usage of Various Payment Methods

• Different Payment Methods and Their Use Cases:

  • Money:

  • Typically for small purchases.

  • Credit/Debit Cards:

  • Used for small to large purchases.

  • Checks:

  • Used for large purchases, enabling payment in person, online, or via mail.

  • Identification Requirements:

  • Money generally requires no identification, credit/debit cards often require identification, and checks typically do as well.

  • Record of Payment:

  • Money provides no record, credit/debit cards provide a record, and checks also provide a record of payment.

The Federal Reserve System

• Overview of the Central Banking System in the U.S.:

  • Composed of 12 Federal Reserve Banks located in various cities across the U.S., including:

  • San Francisco

  • Minneapolis

  • Boston

  • Chicago

  • Cleveland

  • New York

  • Philadelphia

  • Kansas City

  • St. Louis

  • Richmond

  • Dallas

  • Atlanta

Functions of the Federal Reserve

• Key Functions Defined:

  1. Bank for the Government:

  • Provides money for governmental needs, including funding for social programs and wars.

  1. Banker's Bank:

  • Provides loans to other banks to ensure they have adequate funds.

  • Ensures stability and helps prevent bank failures.

  1. Controls Money Supply:

  • Manages inflation and deflation through money supply control:

    • Inflation: Collect and destroy money.

    • Deflation: Print more money.

  1. Clears Checks:

  • Ensures the smooth processing of checks, including mechanisms to prevent fraud and counterfeit checks.

Case Study: Frank Abagnale

• Overview of the Movie 'Catch Me If You Can':

  • Based on the true story of Frank Abagnale, who successfully passed $2.5 million worth of bad checks in 26 countries over a span of 5 years starting at age 16.

• Method of Operation:

  • Abagnale opened bank accounts under false identities, typically depositing between $1,000 to $5,000.

  • He would write checks exceeding his account balance, retrieving around $40,000 before banks recognized the overdraft.

  • After being discovered, he moved to a different bank to continue his operations.

• Capture and Consequences:

  • After 5 years, he was apprehended in France and served 4 years in prison for his actions.

Current status of Frank Abagnale

• Business Ventures:

  • Established his own business, Abagnale & Associates, which advises businesses and banks on fraud protection.

  • His fraud prevention programs have been adopted by over 14,000 businesses and banks.

  • He has been working with the FBI for the past 35 years.

• Professional Roles:

  • Frank W. Abagnale serves as an author, lecturer, and consultant in fraud prevention.