This course serves as an introduction to central banking and monetary policy. We, the public, accept as money (M): notes and coins (N&C) and bank deposits (BD). In other words we accept N&C and BD as the means of payments / medium of exchange. Because we do, we place banks in a unique situation: the major part of their liabilities is BD; therefore they are able to create BD simply by making loans. Because banks are in competition with one another their creditworthiness checks on customers are not always sober, banks are inherently unstable. This means the public need an entity to monitor the banks and to curb excessive money creation: a central bank. Excessive money creation causes inflation and inflation management by the public (ie hedging) diverts attention away from productive behaviour; this is not conducive for economic output and welfare. Central banking is not just about monetary policy. It is also about being banker and advisor to government and managing the money and banking system. All the functions of the central bank are the major inputs into an ultimate objective: financial stability.