Page 55 - Demo
P. 55
In brief: what central banks do
Central banks are lenders of last resort.
Most readers have never experienced the circumstance that triggers the need for the SARB to play this role. Even in instances when it did, this was done in relative secrecy for the reason central banks exist: to prevent panic.
According to De Kock (1929, p 17), a central bank “... should not attempt to call in loans or restrict credit directly in times of emergency. On the contrary, it should be prepared to lend freely to the commercial banks and others in order to relieve the temporary strain.”
In addition, De Kock (1929, pp 17−18) notes: “In connection with its attempt to steady the money market and keep it free from panics, or at any rate minimise the fluctuations and disturbances in the economic life of a country, it is essential for a Central Bank that it should also be either the sole or the principal banker to the Government.”
US bank failures between 1900 and 1914
600 500 400 300 200
100 0
Sources: PA and SARB
55
1934 1938
1942 1946
1950 1954
1958 1962
1966 1970
1974 1978
1982 1986
1990 1994
1998 2002
2006 2010
2014
