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Results tagged with money-supply
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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.
3
votes
Accepted
Overnight deposits?
Not all deposits can be withdrawn at any time without penalty or notice. Consider, for example, CDs. Deposits that can be withdrawn at any time without delay or penalty (checking and deposit accounts …
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3
votes
Are prepaid cards, and gift cards considered a form of money?
Prepaid cards are definitely money by any definition— they are essentially demand deposits. An article from the SF Fed states this clearly:
In contrast to purchases with credit cards, debit card p …
- 6,394
6
votes
Accepted
Who owns the federal reserve?
The Federal Reserve is a system, consisting of the reserve banks, which are "owned" (in a limited fashion) by their member banks (members select the leadership of the reserve banks), and the Federal R …
- 6,394
6
votes
Accepted
Why are banks allowed to resell mortgages?
A bank selling mortgages does not, by itself, increase the money supply.
To see this, work through the balance sheet implications step-by-step:
A bank makes a mortgage loan, swapping cash assets on …
- 6,394
2
votes
The sequence of Money Supply - Interest Rate
It’s just supply and demand. The interest rate is the price at which you can borrow money. For a fixed demand curve, if there’s less money available (the supply curve shifts left), the market will cle …
- 6,394
5
votes
Accepted
How is the interest on fractional reserve money creation paid?
Repayment of interest does require an expansion of the money supply, but not in a way that is inflationary.
Consider first the way that commercial banks make loans. The whole purpose of loans is to …
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1
vote
I there an established correlation between Federal Reserve balance sheet and MB( monetary ba...
The two series are linked by an accounting identity, which is why they tend to move together closely. There’s no theoretical limit to how much larger assets can be than the monetary base, though. If y …
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2
votes
How important are capital requirements for controlling broad money supply?
On different banks, and at different times, different regulatory constraints may bind on their ability to create money:
Reserve requirements relate bank lending (bank assets) to the quantity of res …
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4
votes
What would be the effects of an expiration date on currency?
Having paper money expire is equivalent to setting a negative interest rate. In fact, your question is closely related to one asked before, "Why is 10% the necessary upper bound for a negative interes …
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2
votes
How would banking in EU change if taxpayers withdrew their support for Deposit Guarantee Sch...
Based on the discussion in comments, the core of your question appears to be "What would happen if European governments stopped providing deposit insurance?"
The question and answer about the US depo …
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4
votes
Accepted
Creation of Money - Hypothetical Situation
No, you didn’t. All money is debt, but not all debt is money.
There are two easy ways of thinking about this. The first is to think about the properties of money: unit of account, store of value, me …
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1
vote
Accepted
Does the government ever pay back its debt from the OMO to the Fed?
Yes, it does. Maturing bonds held by the Federal Reserve are repaid by the Treasury, just as they repay any other creditor.
However, the cost to the Treasury of doing this is a policy decision of the …
- 6,394
4
votes
Accepted
What is the effect of Quantitative Easing on the US budget deficit?
No, the deficit is not getting larger due to QE. Certainly not directly, because that's impossible, and also not indirectly, either.
Quantitative easing is a policy of purchasing government bonds wit …
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1
vote
How could monetary policy be affected if cash "gifts" to consumers were more frequently used?
This is only inflationary if the monetary authority monetizes the borrowing. If the Treasury borrows $1000 on the open market by issuing a bond and sends the money to a consumer, no money has been cre …
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4
votes
By what steps and contracts does new money enter the economic system?
The phrasing of your question (the same is true for your description of your understanding) suggests to me that what you need to understand about money creation in banking is much more basic than "ste …
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