I am trying to understand how the money supply (bank deposits + currency) grows over time. That's the end goal. This is the first part of my awful struggle.
I'm superconfused, and almost everything I have read has made it worse.
Linked directly below is the first thing on this topic that made any sense to me, so I'm treating it as my starting point.
My understanding is like this:
- most money creation is done by commercial banks when they make loans
- *each instance of loan issuance is directly responsible for a temporary increase of the money supply
- *these issuances, in aggregate, are indirectly responsible for most of the growth of the money supply over time
Question : Is what I wrote above accurate? It seems logical, but I can think of an equally logical way in which it is wrong, hence my confusion. If correct-ish, please read on:
So I am looking at the loan as having 3 parts:
- part 1: The b