A newly released survey underscores that "Americans have a solid grasp of the highly unequal concentration of wealth in the United States—and they think it's rotten."
The government lowers interest rates to increase economic growth and when the inflation is low. Lending increases the money supply because banks are not required to have full reserves. So yes, the Fed actually increases the effective money supply at the correct rate depending on whether they want the economy to grow or to control inflation
Circulation doesn’t matter. Let me give you adb example.
Let’s say my mom sells her house. The buyer takes out a loan from the bank. My mom gets $300,000 in cash to her bank account, the buyer loses 20% down payment so he’s down $60,000. The bank reserves 10% which is $24,000
Suddenly the economy just got a boost of $300,000 - $60,000 - $24,000 = $216,000
When my mom spends that money, it goes to the bank accounts of businesses so it just stays as numbers. Nobody needs to take any cash out, but everyone gets richer
The government lowers interest rates to increase economic growth and when the inflation is low. Lending increases the money supply because banks are not required to have full reserves. So yes, the Fed actually increases the effective money supply at the correct rate depending on whether they want the economy to grow or to control inflation
The supply in circulation. Bonds are promissory notes. I don’t think the money disappears from ledgers.
The fractional reserve is fixed AFAIK.
Circulation doesn’t matter. Let me give you adb example.
Let’s say my mom sells her house. The buyer takes out a loan from the bank. My mom gets $300,000 in cash to her bank account, the buyer loses 20% down payment so he’s down $60,000. The bank reserves 10% which is $24,000
Suddenly the economy just got a boost of $300,000 - $60,000 - $24,000 = $216,000
When my mom spends that money, it goes to the bank accounts of businesses so it just stays as numbers. Nobody needs to take any cash out, but everyone gets richer
Am no expert but didn’t the money come from the banks virtual reserves? In which case the total money in the economy hasn’t changed.
Before the house purchase it would have been in other investments, no?
No, because they are allowed to do partial reserves. I assumed a reserve ratio of 10:1
OK, thanks but then that raises another question: Doesn’t expanding the money supply devalue the dollar?
Yes, that’s why the Fed in raising the interest rates actually lowers inflation