finance

Central banks are relatively new inventions. An American President (Andrew Jackson) even cancelled its country's central bank in the nineteenth century because he did not think that it was very important. But things have changed since. Central banks today are the most important feature of the financial systems of most countries of the world. Central banks are a bizarre hybrids. Some of their functions are identical to the functions of regular, commercial banks. Other functions are unique to the central bank. On certain functions it has an absolute legal monopoly. Central banks take deposits from other banks and, in certain cases, from foreign governments which deposit their foreign exchange and gold reserves for safekeeping (for instance, with the Federal Reserve Bank of the USA). The Central Bank invests the foreign exchange reserves of the country while trying to maintain an investment portfolio similar to the trade composition of its client - the state. Th...