Who was /is the Central bank and what do the do for liquidity?

Question

Who was /is the Central bank and what do the do for liquidity?

Answer 1

A central bank is a government sponsored bank that serves as a bank for other banks.  In other words, when the banks you see on the street or online need a loan, they can get it from a central bank.  The central bank in the United States is the Federal Reserve System.  Liquidity means cash.  The Federal Reserve provides liquidity by making loans to other banks (and also to some stock brokerage firms).  It also provides liquidity by buying bonds from banks (buying the bonds puts  cash in the hands of the selling banks).  

The purpose of having a central bank is to ensure that when bank customers like you or me write a check or go to the ATM, the bank has cash for us.  If it didn't have cash, the bank might face a run by its depositors and have to shut down (as in "It's a Wonderful Life" starring Jimmy Stewart).  Some aspects of central banking are quite technical, but one key question is whether the Fed's provision of liquidity is fueling inflation.  Some of the issues relating to central banking are discussed on the webpages listed below.