Figure 1: financial system (simplified)

The financial system has six essential elements:

- First: the ultimate lenders (= surplus economic units) and borrowers (= deficit economic

units), i.e. the non-financial economic units that undertake the lending and borrowing
process. The ultimate lenders lend to borrowers either directly or indirectly via financial
intermediaries, by buying the securities they issue.

- Second: the financial intermediaries which intermediate the lending and borrowing

process. They interpose themselves between the lenders and borrowers, and earn a margin
for the benefits of intermediation (including lower risk for the lender). They buy the securities
of the borrowers and issue their own to fund these (and thereby become intermediaries).

- Third: financial instruments (or assets), which are created/issued by the ultimate

borrowers and financial intermediaries to satisfy the financial requirements of the various
participants. These instruments may be marketable (e.g. treasury bills) or non-marketable
(e.g. retirement annuities).

- Fourth: the creation of money (= bank deposits) by banks when they satisfy the demand
for new bank credit. This is a unique feature of banks. Central banks have the tools to curb
money growth.

- Fifth: financial markets, i.e. the institutional arrangements and conventions that exist for
the issue and trading (dealing) of the financial instruments.

- Sixth: price discovery, i.e. the establishment in the financial markets of the price of

money, i.e. the rates of interest on debt (and deposit) instruments and the prices of share
instruments.

20 pesos

• The front or obverse shows President Manuel L. Quezon (1878-1940), president of

the Philippine Commonwealth from 1935 until 1944, and considered the Father of
the National Language. This note, like the previous 20 Peso note, commemorates
the declaration of Filipino as the National Language in 1935. The Malacañang, the
Philippine presidential palace, has moved to the front.

• On the back or reverse, you'll find the Banaue Rice Terraces and a Palm civet, and a
woven design from the Cordilleras.

• The Banaue Rice Terraces have been carved into the Cordilleras mountains in
central Luzon by Ifugao tribesmen over thousands of years with very limited means.

• The palm civet (Paradoxurus hermaphroditus philippinensis) is an indigenous animal

in the Philippines, and curiously related to the most expensive coffee in the world,
the coffee alamid, which is made from coffee beans eaten and partly digested by
palm civets, and collected from their droppings.
50 pesos

• The front shows President Sergio Osmeña (1878-1961), was President of the
Philippines from 1944 to 1946. He had already become a member of the assembly in
1907, at the age of 29. He was also present with the 1944 landing of General
Douglas McArthur in 1944. The "Leyte Landing" monument on Palo beach, Leyte,
that commemorates this event is also shown here.

• The back displays Taal Lake and the giant trevally, and embroidery design from
Batangas.

• Taal Lake is the deepest freshwater lake in the country. Taal volcano, an island in
the middle of this lake is one of the worlds smallest volcano's, and is still regularly
active.

• The giant trevally (Caranx ignobilis) is a fish that only lives in the water of Taal Lake.
It is locally known as Maliputo, and considered highly delicious.

100 pesos

• President Manuel A. Roxas (1892-1948) is honored on the front of the 100 Peso
note. He was the first president of the Philippines after independence, and died in
office from a heart attack in 1948. Further depicted is the Inauguration of the Third
Republic on 4 July 1946, and the Central Bank of the Philippines, of which Roxas
initiated the foundation.

• Some nationalists are happy that the American flag that was on the previous note
has been removed in this redesign. However, the United States eagle, as well as the
Spanish lion remain on the Philippine coat of arms depicted on all Philippine notes.

• The back depicts Mayon Volcano and a whale shark, and indigenous textile from
Bicol.

• Mayon Volcano is an active stratovolcano in the province of Albay, in the Bicol

Region. This volcano is famous for its almost perfect cone shape.

• The whale shark, (Rhincodon typus), locally known as the butanding, is the largest
living fish in the world, and can be found in Sorsogon, not far from Mayon Volcano.
Although it is a member of the shark family, it is a gentle giant that feeds on
plankton, and poises no danger to humans.

200 pesos
 • The front carries the portrait of president Diosdado P. Macapagal (1910-1997), father
of former president Gloria Macapagal Arroyo, who also still poses on this note, but
now neatly tucked away in the lower-left corner, commemorating EDSA People
Power II. Also shown here is the Barasoain Church in Malolos, Bulacan, where in
1898 General Emilio Aguinaldo declared independence from Spanish colonial rule.

• The back side shows the Chocolate Hills of Bohol, a Philippine tarsier, and textile
designs from the Visayas.

• The Chocolate Hills are a characteristic karst landscape in central Bohol, named
after the chocolate-brown color they acquire at the end of the dry season. The exact
number of those 30 to 50 meter high mounds is under dispute, but some claim to
have counted 1268.

• The Philippine tarsier (Tarsius syrichta) is a shy nocturnal animal, that can be found
in Bohol. One of the smallest primates in the world, it can be held in one's hand, but
still is capable to make jumps of three meters between trees. Besides Bohol, it can
be found in Samar, Leyte, and Mindanao.

500 pesos

• On the front of the 500 peso note, Senator Benigno Aquino Jr. (1932-1983) - no
longer frowning - is now joined by his wife, President Corazon C. Aquino (1933-
2009), who became president after the non-violent People Power revolution ousted
Marcos from office. This side further depicts the crowds who participated in the
People Power revolution and the monument for Sen. Benigno Aquino Jr.

•
The back shows the Puerto Princesa Subterranean River, a blue-naped parrot, and
woven cloth from the Southern Philippines.

• The Puerto Princesa Subterranean River is an eight kilometer long underground river
on Palawan, that winds through a huge cave.

•
The blue-naped parrot (Tanygnathus lucionensis) lives in the primary forests of
Palawan and Mindoro.

1000 pesos

• The 1000 peso note is the only one not to depict a former president. On it are three
World War II heros: Josefa Llanes Escoda (1898-1945), Vicente P. Lim (1888-1944),
and Jose Abad Santos (1886-1942).

• Josefa Llanes Escoda was an advocate for women's rights, educator and social
worker. She founded the Girl Scouts of the Philippines, and edited a newspaper. She
was killed for helping prisoners of war during the Japanese occupation.
 • Brigadier General Vicente P. Lim, was Chief of Staff of the Philippine Army, who,
although wounded, organized guerrilla activities. He was captured and killed by the
Japanese.

• Jose Abad Santos was the Chief Justice of the Philippine Supreme Court. He
refused to cooperate with the Japanese occupation forces, and was executed for
that.

• The reverse shows the Tubattaha Reef Marine Park, a South Sea pearl oyster, and
tinalak or ikat-dyed abaca cloth from Mindanoa.

• Tubattaha Reef Marine Park, a nature reserve of 130,000 hectares in the Sulu Sea is
a unique underwater ecosystem. This huge coral reef is home to whales, dolphins,
turtles, sharks, and hundreds species of fish.

• The South Sea pearl oyster (Pinctada maxima) can grow some of the largest pearls
in the world.

Concealed Value

Have you noticed cashiers sometimes hold up 500 peso bills to eye level and appear to look
for something at the lower-left corner of the banknote? Well, they are indeed looking for
something. There is a concealed value in the boxed portion of the banknote above. This is
another security feature that could help distinguish genuine notes from the fake. If you
would look intently on the 500 peso bill, in the area of the boxed portion above, you should
be able to distinguish a "500" figure composed of minute horizontal lines against the
intricate pattern behind it. Hold the bill flat at eye level and tilt it just slightly and the figure
becomes more vivid. Try it now! Do you see it?