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Topic: Europe
Number of pages / Number of words: 10 / 2642
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The central bank functions independently of private banks (ideally) serving only to manage the size of the monetary supply indirectly by open market operations, varying the discount rate, and setting reserve requirements.

In a socialist economy, the function of the banking system is entirely different...


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All banks are part of a single system to distribute funds from the central government to individual business and factories. Branch banks don’t care whether any business is profitable or not because the credit risk of any investment is zero, since the government simply sends more money to an unprofitable factory instead of letting it go under...


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