Central Banking & Monetary Policy: An Introduction
(0 User reviews)
101
978-87-403-0605-7
Books at bookboon.com
2013
For reading a book, Please sign in to your account.
loginTo state that the central bank plays a significant role in the financial system and the real economy is a striking understatement. Because the public generally regards bank deposits (BD) as the means of payments / medium of exchange [notes and coins (N&C) are small in comparison and will soon disappear], BD is money. It follows that because BD is money, banks are able to create BD simply by making loans [marketable debt (MD) and non-marketable debt (NMD)]. This arrangement, while liberating (in terms of there not being a shortage) when compared with the days when money was made of precious metals (and therefore in short supply), is associated with a few problems: