NAME ; WASIA NASIR DEPARTMENT: BBA DATE : 06 APRIL 2014 SUBJECT: MONEY AND BANKING ASSIGNMENT: 03 TEACHER: SIR

BABAR

Central reserve system:

A hotel reservation system, also known as a central reservation system (CRS) is a computerized system that stores and distributes information of a hotel, resort, or other lodging facilities. A central reservation system is a tool to reach the global distribution system as well as internet distribution systems from one single system. A CRS assists hotel managers in managing their online marketing and sales, allowing them to upload their rates and availabilities to be seen by sales channels that are using the CRS. Sales channels may include conventional travel agencies as well as online travel agencies Modules in a CRS include:

Reservations Profiles Groups and blocks Rate and inventory control Administration Reporting Global distribution interface PMS interface

Reservations

Individual, group, shared, and multi-rate reservations Add, change, and cancel bookings including multiple legs Standard, package, negotiated, and group rates (via on screen button) Multi-Currency rate displays Sell messages dynamically linked to CRO office, property, rate or allotment code Geographical and regional single or multi-property search Property details including pictures, raster maps, rate and room type lists, nearby attractions, and point of interest information Links to external context databases to provide in-depth property, rate, and room details List of room types and rate codes List of rate availability strategies and restrictions User definable products by rate code Waitlist capabilities Quote rates system set up initial and secondary rates per property, per day Query system for reservation action items Intuitive, logical sales process flow

MONEY CREATION: The process in which banks increase the amount of funds in checkable deposits (and thus the M1 money supply) by using reserves to make loans. Money creation is made possible through fractional-reserve banking. Because banks keep only a fraction of deposits as reserves, extra reserves can be used to back up and create additional checkable deposits (money) that did not previously exist. Government policy makers (the Federal Reserve System) rely on the money creation process when conducting monetary policy. Money creation by banks is a modern alternative to printing paper currency The first thing to note about the money creation process is that money (M1) consists of two basic components--currency held by the nonbank public and checkable deposits. Money can be created either by creating currency or by creating checkable deposits. Printing paper currency is the "traditional" method of money creation. However, when it comes to monetary policy and controlling the money supply, the creation of checkable deposits is the more important of the two methods. Two Values: Use and Exchange Money creation by the banking system might seem somewhat mystical and magical. With the stroke of a pen or the punch of a few computer keys, banks create a valuable item (money) seemingly out of thin air. To see how this is possible, consider two types of value--value in use and value in exchange.

Value in Use: This is the value of a commodity or asset based on the ability to satisfy wants and needs. A hot fudge sundae, for example, has value in use because a consumer like Edgar Millbottom obtains satisfaction from its consumption, from its use. The value of the hot fudge sundae depends on the satisfaction it generates.

Value in Exchange: This is the value of a commodity or asset based on the ability to trade for other valuable commodities or assets. An item need not provide for the direct satisfaction of wants and needs to have value in exchange so long as it can be traded for other items that DO provide satisfaction.

The Banks No-Win Game

When banks create money, they effectively tax everyone to pay for it with inflation, the same as the federal government. But when they create money to lend they simultaneously put a debt on their books with the interest owed. So eventually they get that money back plus interest. Now imagine this game played over and over millions of times. For every $100 the banks create, they create say $150 in debt. Where is the money to come from to pay the interest? The banks create debt at a much faster rate than they create money. There mathematically isnt enough money in total to pay off all the debt. Somebody has to default! The banks have designed the system so that defaults and bankruptcies are mathematically inevitable. They usually come in waves we call recessions.

How Banks Work

The original idea of banking is you would give your money to the bank for safekeeping. They would lend some of it out, and give you a cut of the interest they received. In return the bank took the risk of the loan defaulting, and handling all the details of making the loans and collecting the payments. The bank attempts to lend money mainly to people who dont need it since they have the best chance of paying it back, hence the invention of the credit card and minimum montly payment. The banks today dont quite create money out of thin air to lend, but close. Consider this simplified version. Imagine an isolated town with only one bank. Somebody comes into the bank and deposits $1000. The bank then lends out $900 of that money to other people in the town. The borrowers of course keep the money in the same bank. Even if they spend it, say at the town lumberyard, the lumberyard will deposit that money back in the bank. So the bank still has $1000 on deposit, even though it also has $900 of it out on loan, generating interest for them. So they lend $900 of the $1000 on the books out again. The government used to insist they keep some 8% of it on hand in case someone made a withdrawal. Since Brian Mulroney, the bank is not required to maintain any reserves at all, though common sense insists they have to keep some reserves to handle daily withdrawals. The bank can lend the same money out over and over and over. This is equivalent to creating money. This all falls apart if for some reason people start withdrawing money, since the bank doesnt have the money. It is mostly out on loan. The bank has insurance to rescue them should they get an unexpected run of withdrawals.

The bank lends the borrowers money the bank does not really have, but the borrowers pay back with real money plus interest, quite a sweet deal for the banks. The same process works even if there is a bank with two branches in the same isolated town, two indepdent banks, two independent banks in two towns, or 5 banks with hundreds of branches in an entire country. They work as an coordinated whole. Who gets the profits from which branches is irrelevant to this process of relending the same money over and over. I dont mean relending the same money after a loan completes, I mean lending the same money over and over at the same time to different people. If the banks could do the same thing with paintings, you could leave your fine art with them for safekeeping and they could rent that same original painting out to dozens of people at once. It would be considered a form of temporary counterfeiting. The whole game depends on the fact that when people borrow money, they usually keep it in a bank, not necessarily the same bank, even though they are not strictly required to, so that it becomes subject to relending. The right of the banks to lend out the same money over and over is equivalent to the right the print temporary money. Just like printing real money, this ability causes inflation. The more money there is, the less each dollar is worth. Many people, myself included, think there is no reason banks should be be granted what effectively amounts to a get-out-of-jail-free-for-counterfeiting card. The ability to be the goose that lays the golden eggs should be reserved for the government. Otherwise it forfeits much of its control over the money supply and inflation

Modern banking:

1. Measuring the Money Supply To understand Modern Banking, an understanding of what constitutes the Money Supply , the money available in the economy, is needed. The Money Supply is divided into two distinct categories: M1 Assets that can be easily accessed and immediately used to purchase goods and services. These are referred to as Liquid Assets. Money deposited in Checking Accounts meets this criteria because checks represent Demand Deposits , as they are paid On Demand for the cash in the account. M2 All of M1 and assets that cannot be used directly as cash but can easily be converted to cash. Money Market Mutual Funds are examples of this because they can be used as collateral against certain types of checks. Savings accounts also fall into this category.

Storing Money One of the basic functions of a bank is to provide a safe, and convenient, storage location for valuables, chiefly money. Vaults are generally fireproof and nearly impenetrable. Banks are insured against losses due to theft. . Saving Money Banks offer a variety of means of saving money such as: Savings Accounts Checking Accounts Money Market Accounts Certificates of

Deposit Banks generally pay interest, an amount paid for the use of your money, on these accounts.

. Loans Banks offer loans , money given out for a period of time in exchange for fees and interest charges. Banks are limited in the total amount of loans that they issue because of the Fractional Reserve System . This is the idea that banks must keep a certain percentage of the value of loans that they issue on hand in the form of deposits. . Mortgages Mortgages are specific types of loans used to buy real estate. They generally come in term lengths of 15, 25, or 30 years. A key determining factor in determining the interest rate and the term on the mortgage is the borrowers Creditworthiness. That is a reflection of the likelihood that the borrower will be able to repay the loan and not default , or fail to repay the loan. . Credit Cards Credit Cards are cards that allow their holders to make purchases of goods and services in exchange for the credit cards provider immediately paying for the good or service, and the card holder promising to pay back the amount of the purchase to the card provider over a period of time, and with interest. The amount of credit available to a card holder is often a reflection of their creditworthiness. . Simple and Compound Interest Banks earn income through the interest that they charge on their lending. As we have already established, Interest is the price paid to use borrowed money. In can take two forms: Simple Interest paid on an annualized basis as a percentage of the value of the loan or deposit know as the Principal . Compound Interest paid annually on the total principal, and the accumulated interest from previous time periods. . Earning a Profit Banks exist to earn money the same as any other business. They do this through charging interest on their lending and through charging various fees for their services. . Modern E-Commerce Modern Banks utilize electronic formats to complete many of their functions. These electronic formats can include: Automated Teller Machines (ATMs) Debit Cards Home Banking Automatic Clearing Houses (ACHs) Stored Value Cards . ATMs ATMs replace human bank tellers in performing basic banking functions such as: Deposits Withdrawals Account Inquiries Key advantages of ATMs include: 24 hour availability. Elimination of labor costs. Convenience of location. . Debit Cards Debit cards are used to electronically withdraw funds directly from the cardholders accounts. Most debit cards require a Personal Identification Number (PIN) to be used to verify the transaction. . Home Banking Home banking is the process of completing financial transactions from your own home as opposed to utilizing a branch of a bank. Actions can include: Make Account Inquiries Transfer Money Pay Bills Apply for Loans Direct Deposit

. Automatic Clearing Houses (ACHs) ACHs facilitate the payment of bills without the need to write a check. An ACH can be used to create automatic monthly bill payments so that the payer does not have to initiate the payment of the bill. Benefits Include: Postal Savings No Forgotten Payments Time Savings . Stored Value Cards Stored Value Cards are used in a manner very similar to a Debit Card. The card is Loaded, or credited, with a set value. That value can then be used to make purchases. Examples of this concept include: Prepaid Calling Cards Store Gift Cards

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Instrument used for reduction

Paypal Visa and debit cards discounting Bank Guarantees before entering into factoring and invoice Take professional advice Prompt payment rebates Good credit management settlement processes Discount for early Credit insurance Staged Payments Invoice discounting Part Payment Invoice Factoring COD/CADs Letter of credit Proforma Invoice Risk Reduction Techniques