Questions tagged [money-supply]
Use for questions primarily related to the stock of money, either narrow money (MB or M0), and broad money (M1, M2, etc). This can also be used in questions related to the creation of money by governments and central banks, including questions related to models with a money market like IS-LM, where the supply is of importance.
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Can printing money with simultaneous government intervention to increase supply prevent inflation?
Just as above...If we print money and simultaneously introduce some sort of government intervention in order to increase supply/ production, then supply and demand would be 'balanced' and therefore ...
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2answers
62 views
What would monetarists do when interest rates approach zero and become ineffective?
So monetarist economists such as Milton Friedman focus on managing the money supply and lower interest rates as a solution to economic downturn. But what would they do in a recession as the interest ...
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6answers
615 views
How can the stock market keep growing indefinitely?
It sounds like a dumb question, but there is only so much money in the world. Assets can grow, but money can only be printed. So if there is 400 trillion dollars worth of money in the world, and the ...
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1answer
19 views
Plotting money market equilibrium for 2020
I am trying to roughly sketch up supply / demand curves by parameterizing the major happenings in the money market in 2020. I intend to use this chart as the template:
Below, I'll outline my thought ...
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3answers
131 views
If I shred a $20 bill, is society poorer? What is the effect on the real economy?
If the answer is yes, society is poorer, then the converse must hold true: that the government could make us all wealthier by simply printing money.
However, a collapse in the money supply must have ...
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1answer
30 views
Overnight deposits?
When considering $M_{0}$, $M_{1}$ etc, there is something called "overnight deposits" which throws me off since one can withdraw money at any time from ones bank account and so what one has ...
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1answer
28 views
Model with money creation
is there any macro model/paper introducing money creation (ex nihilo money creation) ? I would be very interested in reading them.
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0answers
47 views
How would a global Robin Hood deed affect the economy? [closed]
In one fiction series about a dystopian world, a small group of wealthy criminals owned a large fraction of the world's cash, which was on their bank accounts in a single offshore bank. In the happy ...
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10answers
7k views
Why do banks take deposits if they do not need them to make loans?
I have taken some economics courses in university, where I was introduced to fractional-reserve banking. From my understanding, in fractional-reserve banking, the bank has motivation to encourage ...
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1answer
99 views
Can the money multiplier happen within a single bank / a single loan?
Many tutorials explain the money multiplier effect by involving a chain of banks (e.g. khan academy)
So if reserve requirements are 10% and bank A owns 1000€ reserves, bank A can lend 900€ to bank B; ...
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1answer
20 views
Why is deflation a likely short-term of an increase in M2?
The year-on-year growth in M2 — a broad measure of US money supply —
has rocketed this year due to the efforts of monetary and fiscal
policymakers to reduce the economic damage caused by the pandemic.
...
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2answers
59 views
What effect has the 30% increase in money supply from Feb-June of 2020 had?
I commented on a previous question that this is probably a better one. Old question
Generally speaking, how has the increase in money supply resulting from the CARES act stimulus package affected the ...
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1answer
83 views
Why may printing trillions of dollars not lead to inflation?
By definition, inflation should be affected by the increase of the money supply. During the pandemic, there have been numerous huge monetary policies executed, e.g., quantitative easing (QE), ...
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1answer
46 views
Does inflation equal change in M1 or M2?
According to monetarism, inflation can be predicted precisely by the change in money supply and GDP growth.
Does "money supply" here refer to M1 or M2, i.e. does it include debts created by ...
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0answers
54 views
How does the U.S. Fed printing money result in a debt for future generations?
I'm unclear when I see news articles about how the U.S. Treasury will borrow $2 Trillion in the second half of 2020, why would the Fed printing money result in a debt for future generations?
I can ...
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1answer
58 views
How does the Fed's stimulus push stocks markets higher?
I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March.
But how does the mechanism work? How does the ...
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1answer
40 views
How does total money in the economy changes?
I don't understand why total money in economy increases. Where does this money come from?
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1answer
37 views
How can non-US banks issue USD loans?
I understand, commercial banks are entitled by the Central Bank to "create new money" when they issue a loan and correspondingly "destroy the money" when the loan is paid back (...
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1answer
50 views
How buying bonds indirectly from the government prevents the central bank from financing government deficit?
From Krugman's macroeconomic textbook (highlighting is mine):
"In an open-market operation the Federal Reserve buys or sells some of
the exist- ing stock of U.S. Treasury bills, normally through ...
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1answer
27 views
Equation of exchange and inflation target
The inflation target is $2$% and the equation of exchange states $MV=PQ$. Is the idea that we want to have greater money supply growth then real growth in general?
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4answers
466 views
Why does an economic slowdown lead to deflation?
Usually economists say that in recession there is deflation, so increasing the money supply does not lead to a high level of inflation.
According to the Quantity theory of money, the price level is ...
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2answers
44 views
Does people paying back their debts cause deflation?
The majority of the monetary supply results from credit, with every loan creating pairs of assets and liabilities representing the same underlying value. Considering that every time someone pays back ...
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0answers
25 views
Pareto efficiency analysis of level of M1 growth from quantitative easing
BMO recently conducted an analysis on US monetary policy and noted that quantitative easing has had diminishing effects on M1 growth. Daniel Krieter wrote:
QE has fed through to the real economy in a ...
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3answers
292 views
How does an increase in USD money supply affect inflation?
Say an average american household is bringing in $50,000 a year.
Between ongoing quantitative easing and the drastic stimulus packages passed in February-May 2020, the USD Money Supply increased by 25%...
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1answer
33 views
Quantitative easing and interest rate parity
Suppose a country initiates quantitative easing by printing money and buying government debt. This will put a downward pressure on interest rates. Will this action tend to depreciate the country's ...
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1answer
35 views
What does the Fed do with their profits?
As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
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1answer
33 views
Does the government ever pay back its debt from the OMO to the Fed? [closed]
I'm getting confused about how exactly does money being created by the Fed.
From investopidia.com:
...
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2answers
52 views
Why does the Fed feel the need to reduce its balance sheet? [closed]
Why does the Fed feel the need to reduce its balance sheet?
What is the problem with the Fed having a large balance sheet long term? What would happen if the value on the Fed's balance sheet ...
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1answer
17 views
Why has M1 shoot up?
M1 has increased massively during the current pandemic. Below is an image from Fred St. Louis. Similar picture emerges from other countries.
According to Fed data, the increase is due to a rapid ...
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1answer
41 views
Does Direct Benefit Transfers make an economy poorer?
Printing money and giving to the poor causes inflation.
Increases demand and hikes prices. This is basically certain.
But on the contrary, a paper titled Debunking the Stereotype of the Lazy Welfare ...
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0answers
28 views
In credit easing, how do central banks avoid allegations of unequal treatment?
In credit easing, central banks purchase private assets such as corporate bonds. How do central banks choose which corporate bonds to buy? If the central bank buys bonds of one company but not those ...
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1answer
60 views
How do debt-free governments control the money supply?
From what I read in my introductory macroeconomics textbook, central banks can control the money supply by selling government bonds in the market (decreases money supply), or by buying government ...
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1answer
27 views
How does the Monetary base, Narrow money and Broad money affect inflation?
In a lot of countries (e.g. Hungary) the M0, M1, M2 and M3 all doubled, tripled or even quadrupled in the past 10 years. How does this directly affect inflation?
Since just because M2 doubles, it ...
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0answers
20 views
Determining the price level when velocity is unknown, can k = v?
According to the quantity equation mv = py
if m = 2000, y = 400 and then if m doubles while velocity remains constant (%change in p = %change in m) would the change in P be from 2,5 to 5 or 5 to 10?
I'...
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1answer
30 views
How yield rates influence the “cost of borrowing” for borrowers
I am currently learning about quantitative easing, and I am having trouble understanding yield rates and how that influences the "cost of borrowing".
This is the resource I am using.
The lecturer ...
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1answer
38 views
Can setting bank's reserve requirement ratio in 100% simulate gold standard?
Statement:
If you want a gold standard, it's easier to set bank's reserve requirement to 100%.
Context:
This was a comment in a video telling how government actions influence monetary inflation.
...
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1answer
73 views
Does constant money supply hinder economy?
Consider an hypothetical isolated economy (an island) where:
the only form of money is Coins
the amount of Coins is constant
the Coins are never lost or destroyed
In that scenario:
can the economy ...
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1answer
97 views
Why is the US rating AAAA+ after they printed trillions of dollars out of thin air, and bailed out the US stock market? [closed]
When any other country tries to print, there's huge inflation, devalued currency, bad ratings from rating companies (mostly US go figure why?), interest rates increases. But why don't these happen to ...
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1answer
30 views
Does m0 increase money supply?
If m0 can only be created as an exchange of federal reserve deposits does this mean that m0 does not increase money supply?
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1answer
20 views
Can a commercial bank lend money from transaction/checking account as it would from a deposit account?
Transaction/checking accounts are highly liquid - M1
Deposit accounts are less liquid - M2
Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve ...
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1answer
19 views
Can we figured out the total money supply using MB? [closed]
If we look at the total in the federal reserves account
Here at the moment is about 3 trillion and if the reserve requirement is 10% does that mean that there is at least 30 trillion out there in ...
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1answer
23 views
Can m0 be created as a loan? [closed]
Are the following true?
m0 is only created by destroying something else (federal reserve deposits)?
m0 can be created as a loan?
Related questions: can something other than federal reserve deposits ...
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1answer
30 views
Did Bitcoin increase the money supply of the world?
I was reading about M2 and it somehow got me asking this question: did Bitcoin, by merely popping into existence, increase the money supply of the world? Is it classified as "near money"?
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1answer
27 views
Would saving money outside of banking system be able to reduce monetary base?
First of all, here is definition of monetary base taken from Investopedia
A monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in ...
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1answer
48 views
What would happen if the U.S. “refinanced” its national debt?
Interest rates are at historical lows. I believe they went negative in parts of Europe recently. Since interest on the national debt is one of the biggest, if not the biggest, expense item of the U.S. ...
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0answers
17 views
Why does the money supply graph have nominal and not real interest rate as the y-axis
Why does the money supply graph have nominal and not real interest rate as the y-axis. And, shouldn't an increase in money supply cause and increase in inflation and thus nominal ir.
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1answer
43 views
Why has QE produced hyper-inflation in other countries, but not US and China? [duplicate]
QE and similar methods ("printing money", increasing M2 money supply) have caused currencies in countries such as Zimbabwe and Venezuela to collapse.
Why hasn't it caused similar issues in countries ...
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1answer
60 views
The government does not need to gather capital via tax and Treasuries to spend? According to MMT
I have watched Warren Moslers interview. https://www.youtube.com/watch?v=W97s3zbFKvc&t=841s. At 7:26 he says that the Treasury does not issue securities for the purpose of financing spending (it ...
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0answers
26 views
What happens if you cannot lend more than what you have?
This is hypothetical but what would happen if you cannot lend more money than you have? Say you have £100, the maximum you can lend is £100. But somehow you lend £200 to Joe, and Joe spends all of it ...
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1answer
14 views
How does the Fed measure the shadow banking sector in the US?
It's apparently popular to say on TV [at 2:20 in that clip] that the Fed has no idea what's going on in shadow banking sector. To what extent is that true? (I could ask this on Skeptics as well given ...
