Remaining agnostic as to whether or not my Note Payable is money: Say my friend takes out a cheaper loan because he uses my Note as collateral. So his interest rate 10% => 7%. While it may not technically be money (not all collateral is), its silhouette remains. Thus, has my IOU not increased the money supply? How is this conceptually treated?
Let's assume my IOU IS money because I'm heavily trustworthy, etc. For example, ABS, MBS, some CDOs (effectively) trade as information-insensitive debt. How much of the Monetary Supply is created Endogenously (in private situations like this), vs. Exogenously (by the Fed, etc) ?
- No or not necessarily because you can't know if the actor will save income or pay down debt, or spend more. The interest rate is not a single factor that determines behaviour.
- Nearly all of it is privately created debt money (97%), in circulation. Your 'money' is some bank's liability. You trade their IOUs and they are trusted/licensed to create them. (By all of it I mean in practical terms...there are nominally huge amounts of certain types of security but I don't think their relevance to mainstream social function is useful in the context of this kind of topic)
Video from BoE: https://youtu.be/CvRAqR2pAgw
On the influence of the Fed, this is a huge topic. Basically since 2007/8 the Fed creates enough money to compensate for credit contraction in the private sector so that the appearance of growth is maintained. So if in the US nominal GDP growth is 2%, after removing fed stimulus you would see that actual growth is depression level negative. Also the fed sends signals. It could say it would start purchasing corporate bonds directly, which would trigger fund managers into a snowball doing the same. But basically the situation since 2008 is that the Fed is forced to keep monetary policy loose, stimulus ample, to keep lending up and credit growth going.