1. Find a recent ( Jan 2021-present) money and banking related article in the media (the Economist, Globe and Mail, National Post, New York Times, etc.,), and attempt to explain parts or all of it...

Finance – Money and Banking
1. Find recent (Jan 2021-present) money and banking related article in the media
This is an article taken from The New York Times dated 4th February, 2021. The article was written the Eshe Nelson. The article talks about the declaration by Bank of England to all the banks in Britain to take appropriate steps for a negative interest rate which may be implemented with a period of six months. Due to this the central banks will be able to use various policy tools in order to promote more lending. This was a step taken by the central bank monetary policy committee in collaboration with the Bank of England to boost the economy post covid-19 global pandemic situation. The GDP of the British economy suffered massively after its exit from European Union and due to Covid-19 pandemic. Most of the businesses were closed due to lockdowns imposed by the federal government. As a result of this the GDP of Britain is expected to fall 4.2% in the first quarter of 2021. Therefore, in order to encourage more borrowings and investment opportunities, lowering interest rate was the only way to boost the economy by the early 2022. But, there are criticisms to this issue. First of all lowering of interest rates by the banks will upset the British savers. Also there will be various ways banks will try to generate earnings like raising fees and various rates as well as reducing the lending quantity. On the other hand, negative interest rates will help to stimulate the growth of the British economy and bring the inflation much quicker as per the banking policies. Thus, negative interest rate is very rare and is practiced only in Japan and European Central Banks (Eshe Nelson, 2021). But if it is implemented, then the banks will have to pay interest to the borrowers on the amount of lending and this will help the borrower to earn interest and principal amount of loan to spur the economic activity and enhance the spending on investments. On the other hand the saver of the banks in Britain will have to pay interest for the money they save with the banks (Corporate Finance Institute).
2. Discuss the potential moral hazard and adverse selection problems that may happen as a result of introducing deposit insurance
Deposit insurances are schemes introduced by the federal government guaranteeing the depositors that a certain percentage of their deposited money will be paid if the bank fails. The government will generally sell off the assets of the bank in order to reimburse the depositors money and if there is any shortfall, it will be met from the taxpayer’s funds. But, there are certain disadvantages of deposit insurance which are as follows:
a. Since the bank is insured under deposit insurance, the customers will have little or no interest to verify the risky lending made by the banks. This means the banks are free to lend to whomever they likes resulting in lowering its capital adequacy ratio which is not at all acceptable as per the central...