banking system Essay

Submitted By tlushaj
Words: 595
Pages: 3

“Why did the ‘Big Bang’ happen in the city of London”
The once dominant financial society, the City of London was falling behind foreign banks such New York’s Wall Street; in danger of being left behind and in-modernizing in the capitalist world.
Margret Thatcher claimed a need of a free market and no over regulation and the removal of “Old Boy Networking” allowing unfettered competition and meritocracy
The Big Bang in relation to investment banking means a change in legal or regulatory aspects. In 1987-1988 the Big Bang for the UK meant that deregulation in the financial market. Reforms were subjected to stock brokers and investors allowing them to trade independently without the requirement to interact with market makers or companies which had exclusive rights in trading stocks in the exchange.
The Big Bang meant that full interaction of outside ownership of member firms, allowing London to function on a modern capitalization as an international financial center.

The economic term ‘circular flow of income’ means joint circulation of income between producers and consumers. An example is how money flows to workers as salary, and money flows back to firms from purchases and in other words supply creates its own demand.
Businesses produce products which creates income which is generated from factors of production such as land labour capital and enterprise.
Injection of money into the circular flow is represented from investments, government spending’s, exports which increase the output levels. Inflow can be seen from capital spending by firms such as investment expenditure in new technology, the government invests money to develop its economy such as in the form of benefits and the NHS also overseas customers spending ability in UK services and goods increase the amount of money available to be circulated
Leakages from the circular flow would mean savings, money put aside for future spending, taxation such as income tax and national insurance also money which is sent in foreign goods and services meaning imports.

“Detail a significant difference between Building societies and Retail Banks up to the 1980s”
In that period the sort of bank that most people are not familiar with is the ‘Savings banks’. The reason for their use was to encourage frugality by the poor, customers did not collect interest but simply had a place to save money that was safer and not in reach from their pockets, and so that spending’s on gambling or…