INTERMEDIATE

Lender of Last Resort

MARCH 10, 2013

A major function of a central bank is for it to act as “lender of last resort.” During a financial crisis, the central bank is usually expected to lend to banks that are illiquid but not insolvent. Loans from the central bank help at-risk banks avoid bankruptcy during a bank run by increasing their reserve levels. Absent a central bank, the role of lender of last resort has filled by voluntary clearing house associations.

 

Gregory Rehmke - Money and Inflation

Kahn AcademyThe Discount Rate: The discount rate and window. Lender of last resort. 

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For centuries, hierarchical models dominated human organizations. Kings, warlords, and emperors could rally groups--but also oppress them. Non-hierarchical forms of organization, though, are increasingly defining our lives. It's no secret how this shift has benefited out social lives, including dating, and it's becoming more commonplace even in the corporate world. But it has also now come even to organizations bent on domination rather than human flourishing, as the Islamic State shows. If even destructive groups rely on this form of entrepreneurial organization, then hierarchy's time could truly be coming to an end.
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