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What Is a Central Bank? A central bank is a financial institution given privileged control over the production and distribution of money and credit for a natio
by scottiebarnes 4y ago
What Is a Central Bank?
A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.
https://www.investopedia.com/terms/c/centralbank.asp https://www.investopedia.com/terms/c/centralbank.asp
- deleted 4y ago[deleted]
- arcticbull 4y agoThe point I was making is not that the central banks don't 'create money' per se (they create some kinds of money, bank reserves to be precise), but that in a modern, fractional-reserve banking system, the money supply itself is created not by the central banks but rather by retail banks. When you borrow money to buy a house for instance, that's the point at which money is created. Money isn't pushed into the economy. Money is pulled when loans are taken out, from retail institutions. These loans are constantly repaid meaning that the money supply is controlled by the quantity of origination of loans and the rate of repayment of existing loans. The Fed controls the circulating supply by adjusting the demand for new debt, by setting interest rates. Generally even QE, the Fed creates reserves and swaps them for liquid assets like treasuries. These reserves then collateralize additional lending. [1] [1] https://www.forbes.com/advisor/investing/quantitative-easing-qe/ https://www.forbes.com/advisor/investing/quantitative-easing...