Guide to Analysing Companies

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MONETARY POLICY
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certain levers at its disposal (notably the ability to set the rate
of interest, to buy and sell foreign currency in the exchange
markets and to set the level of reserves that banks must main-
tain) to influence the supply of money and credit.
Changes in the bank rate (or, in the United States, the fed
funds rate) trigger a chain of events that affect short-term
interest rates, foreign-exchange rates, the money supply
and credit, which, in turn, affect employment, industrial output,
and the prices of goods and services on offer. Some central
banks and governments are better than others at getting the
balance right.
Money-center bank
A large bank in the main financial centres of the United
States (New York, Chicago, Miami, Los Angeles and so on)
which acts as a clearing bank for smaller banks in the
region. Money-center banks would rather lend to governments,
companies and other banks than to consumers. Because of their
bigger role, regulators worry more about the health of money-
center banks than they do about that of others.
Money laundering
The process of turning ill-gotten gains into seemingly legitimate
cash. This usually involves passing dirty money through clean
places (such as Switzerland) in order to disguise where it came
from and to ensure that it avoids the gaze of the tax man. The
expression arose from the practice of one of the most infamous
launderers of the 20th century. Al Capone, who profited hugely
from dealing (among other things) in illicit alcohol during prohi-
bition in the United States, hit upon the idea of setting up legiti-
mate laundries through which to channel his illegitimate cash.
These days, most of the cash generated from illicit businesses
is channelled through companies in places where their owners
can retain their anonymity. So easy is it to establish a company
that money can be whisked in and out of a financial