第一课第三篇含答案与讲解.doc

Passage 3I. Read the following passage and answer the questions. 1.1In Goethes 1831 drama Faust, the devil persuades a bankrupt emperor to print and spend vast quantities of paper money as a short-term fix for his countrys fiscal problems. As a consequence, the empire ultimately unravels and descends into chaos. Today, governments that have relied on quantitative easing instead of undertaking necessary structural reforms have arguably entered into the grandest Faustian bargain in financial history. 2.As a result of multi-trillion-dollar quantitative easing programmes, central banks have compromised their ability to control the money supply, making them vulnerable to runaway inflation. When interest rates rise, the value of central bank assets could fall below the face value of their liabilities, potentially rendering them incapable of protecting the purchasing power of their currencies. To better understand the potential consequences of quantitative easing, it is useful to review the historical evolution of central banking. Early central banks were essentially clearing houses for gold. Individuals and trading companies placed their bullion on deposit and received a claim that could be redeemed upon demand. The systems strength was largely derived from its simplicity. Todays global monetary system, by contrast, has virtually no gold backing and depends entirely on faith that central bankers can control the supply of paper money. 3.When founded in 1913, the Federal Reserves definition of eligible reserve assets was extended beyond gold to include short-term bills and then in the 1930s, Treasury securities. The problem with using Treasury securities as a reserve asset is that, unlike gold, Treasuries have duration. This means that in a rising interest rate environment, the value of the Federal Reserves asset portfolio could potentially decline below the face value of its liabilities (Federal Reserve notes). 4.In 2008, just before the first of two rounds of quantitative easing, the Federal Reserve had $41bn in capital and roughly $872bn in liabilities, resulting in a debt to equity ratio of roughly 21-to-one. The Federal Reserves portfolio had $480bn in Treasury securities with an asset duration of about 2.5 years. Therefore, a 100 basis point increase in interest rates would have caused the value of its portfolio to fall by 2.5 per cent, or $12bn. A loss of that magnitude would have been severe but not devastating. 5.By 2011, the Feds portfolio consisted of more than $2.6tn in Treasury and agency securities, mortgage bonds and other fixed income assets, and its debt-to-equity ratio had dramatically increased to 51-to-one. Under Operation Twist, the Fed swapped its short-term securities holdings for longer-term ones, thereby extending the duration of its portfolio to more than eight years. Now, a 100 basis point increase in interest rates would cause the market value of the Federal Reserves assets to fall by about 8 per cent, or $200bn, leaving it insolvent, with a capital deficit of about $150bn. Hypothetically, a 5 percent rise in interest rates could cause a trillion dollar decline in the value of the Federal Reserves assets. 6.2As the economy continues to expand, the Federal Reserve will eventually seek to normalise monetary policy, resulting in higher interest rates. In this scenario, the central bank could find that the market value of its portfolio has declined to the point where it no longer has enough sellable assets to adequately reduce the money supply and maintain the purchasing power of the dollar. Given US dependence on foreign capital flows, if the stability of the dollar is drawn into question, the ability of the US to finance its deficits may falter. The Federal Reserve could then find itself the buyer of last resort for Treasury securities. In doing so, the government would become hostage to its printing press, and a currency crisis or runaway inflation could take hold. 7.To hedge against deterioration in the dollars purchasing power, investors have already begun migrating towards hard assets such as gold, commercial property, and artwork. Other assets likely to perform well in the immediate term because of the effects of quantitative easing are credit-related instruments including bank loans and asset-backed securities. European equities are likely to outperform US equities over coming years because of ongoing balance sheet expansion by the European Central Bank. Long-duration, fixed-rate assets such as government bonds are likely to underperform in the years ahead, indicating that now may be a better time to sell Treasury securities than buy them. 8.Less than half a year before the centennial of central banking in the US, neither policy makers nor investors have much to celebrate. By abandoning monetary orthodoxy and pursuing large-scale asset purchases, global central banks have increased the risk of inflation and compromised their ability to stamp it out. It is too early to predict exactly how this Faustian bargain will play out; but, with each additional paper note that rolls off the printing press or gets conjured up in the ether, the likelihood of a happy ending becomes increasingly evanescent.1. Why is it that when interest rates rise, the value of assets could fall?A. The central bank made such a rule.B. Higher interest rates mean inflation, and thus assets devalue.C. Higher interest rates indicate that investors are not going to buy assets unless they are sold cheaper.D. Theres no cause and effect between these two phenomena.2. According to the passage, what is the wrong description of early financial systems?A. People used gold as currency.B. Banks issued gold receipts as paper money.C. Powerful bankers had the ability to cause inflation.D. Early central banks were essentially clearing houses for gold.3. Which one of the following is correct about the Federal Reserve? (Hint: money issued by a central bank is considered its debt.)A. It is the first central bank in the world.B. It is a department in the cabinet.C. Quantitative Easing dramatically increased the Feds debt scale.D. By 2011, the Feds debt-to-equity ratio is about 51%.4. What can we infer from the following sentence?global central banks have increased the risk of inflation and compromised their ability to stamp it out.A. Central banks can print money very easily.B. Central banks would suffer reserve asset losses if they themselves raise interest rates.C. Central banks can feel free to make huge asset purchases that inject money into the economy.D. All the above are correct.答案 1.C 2.C 3.C 4.DII. Translate into Chinese the underlined sentences in the above passage.1. In Goethes 1831 drama Faust, the devil persuades a bankrupt emperor to print and spend vast quantities of paper money as a short-term fix for his countrys fiscal problems. As a consequence, the empire ultimately unravels and descends into chaos. Today, governments that have relied on quantitative easing instead of undertaking necessary structural reforms have arguably entered into the grandest Faustian bargain in financial history.在歌德1831年的戏剧浮士德里，魔鬼劝一个破产的皇帝印制并支出大量纸币，作为解决国家财政问题的权宜之计。因此，整个帝国最终分崩离析，一片混乱。如今，依赖量化宽松而不是采取必要结构性改革措施的政府大概签订了金融史上最大的一笔浮士德式的交易。2. As the economy continues to expand, the Federal Reserve will eventually seek to normalise monetary policy, resulting in higher interest rates. In this scenario, the central bank could find that the market value of its portfolio has declined to the point where it no longer has enough sellable assets to adequately reduce the money supply and maintain the purchasing power of the dollar. 随着经济的不断发展，美联储最后必定会想方设法实现货币政策正常化，这样就会抬高利率。在这种情况下，美联储就会发现其证券投资组合的市值直线下降，甚至到了不再有足够可出售资产来充分减少货币供应并保持美元购买力的程度。词汇bankrupt 破产paper money纸币fix 应急措施，补救方法Unravel拆散，散开Chaos混乱quantitative easing量化宽松Eg. Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.Compromise妥协，折中vulnerable 易受攻击的，易受的攻击；易受伤害的；有弱点的Eg. Old people are particularly vulnerable members of our society.老人是我们社会中特别容易受到伤害的成员。runaway 失控的Liabilities债务Render 致使cl