• Research Paper on:
    How Liquidity is Maintained

    Number of Pages: 5

     

    Summary of the research paper:

    In five pages this paper examines money supply and demand control and the role played by the lender of last resort in this consideration of the maintenance of liquidity. Five sources are listed in the bibliography.

    Name of Research Paper File: TS14_TEliquid.rtf

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    Unformatted Sample Text from the Research Paper:
    current position of the financial frameworks though regulation and general financial structures. The liquidity required in the UK is protected and ensured by the presence of the Bank of England,  the central bank that has the role of lender of the last resort. To understand how this is ensured and protected in the UK the liquidity problem need to be  explained. To begin with any liquidity issue will centre on a reserve asset. There are three main types of assets that can be used; a pure commodity, such as gold,  a paper backed commodity with the commitment form the government to buy it back for a fixed price, or a fiat paper standard, which has no real backing. The UK  system is based on government promises with bank notes containing the words "I promise to pay the bearer on demand the sum of". The key factor is that the asset  need to increase in line with the demand that is determined by the economic conditions. The next issue of liquidly concerns the need for a lender of last resort.  In a financial crises there needs to be access to the system of short terms funds. There is the need for borrowers to have resort to a source of  borrowing to prevent financial failure that may then spread though the entire financial system (Howells and Bain, 1998). This needs to be achieved without exposure or risk of moral hazard;  the banks taking unnecessary risks knowing that the borrower (usually a bank) will be bailed out by the lender of last resort to save the system. In the UK  the financial system may be seen as hinged upon the role of the Bank of England as the lender of last report. This is a term that may easily be 

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