1. Finance and Accounting Part 1 Money and Banking

2. Money • Modern societies have evolved to pay for goods and services using an indirect monetary system rather than through barter • Anything agreed upon can be used as money • Coins & bills • Shells • Bitcoin

3. Functions of Money • Medium of Exchange you can exchange your labor for goods and services indirectly • Standard of Value creates a commonly agreed upon amount that items are worth and cost • Store of Value allows assets to be stored and saved

4. Characteristics of Money • Must be scarce -if it’s too readily available it won’t retain it’s value • Must be accepted -useless if seller won’t accept it, (Bitcoin, AMEX) • Must be divisible into parts -dollar broke down into quarters, dimes, etc. (8 bits) • Must be portable and durable -$1 bills are in circulation for about 18 months and coins for many years (pictured Australian 1 tonne gold coin) -

5. Where Does Money Come From? • New money is printed and minted by the US Department of the Treasury • Bureau of Engraving and Printing • US Mint • Philadelphia • Denver • San Francisco • West Point NY • Money is added to the national money supply by the Federal Reserve buying US Treasury bonds.

6. Banking • Manage, store, maintain the supply and move around money • Store money in checking and savings accounts • Transfers money between buyer and seller through checks, check cards, credit cards • Lends money to consumers and businesses • Lending - When someone needs money they don’t have for major purchase (house, car, business upgrade, college tuition) a bank may loan them money. • Usually requires COLLATERAL, or something of value that guarantees that you’ll repay the loan. • INTEREST is the amount paid on top of the value of the loan. Interest is how banks make profit loaning money.

7. Micro-lending • Microloans are loans made to people who may not have collateral or otherwise don’t qulify for traditional loans • Use of these was pioneered by Bangladeshi economist Mohammad Yunus and his Grameen Bank • Yunus would load money to women, the poor and illiterate to help them start new small businesses. • Relied on societal pressure rather than threat of violence (loan shark) or loss of collateral to guarantee repayment • Lendees make small weekly repayments • Yunus won 2006 Nobel Peace Prize for his work encouraging small business among the poor

8. Mohammad Yunus Interview with the New York Times Microlending on “How Stuff Works”