Money Supplies Around The World
See also: Money supplyFractional-reserve banking determines the relationship between the amount of "central bank money" in the official money supply statistics and the total money supply. Most of the money in these systems is "commercial bank money". Fractional-reserve banking allows the creation of commercial bank money, which increases the money supply through the deposit creation multiplier. The issue of money through the banking system is a mechanism of monetary transmission, which a central bank can influence indirectly by raising or lowering interest rates (although banking regulations may also be adjusted to influence the money supply, depending on the circumstances).
This table gives an outline of the makeup of money supplies worldwide. Most of the money in any given money supply consists of commercial bank money. The value of commercial bank money is based on the fact that it can be exchanged freely at a bank for central bank money.
The actual increase in the money supply through this process may be lower, as (at each step) banks may choose to hold reserves in excess of the statutory minimum, borrowers may let some funds sit idle, and some members of the public may choose to hold cash, and there also may be delays or frictions in the lending process. Government regulations may also be used to limit the money creation process by preventing banks from giving out loans even though the reserve requirements have been fulfilled.
Read more about this topic: Criticism Of Fractional Reserve Banking
Famous quotes containing the words the world, money, supplies and/or world:
“One of the last of the philosophers,Connecticut gave him to the world,he peddled first her wares, afterwards, as he declares, his brains. These he peddles still, prompting God and disgracing man, bearing for fruit his brain only, like the nut its kernel.”
—Henry David Thoreau (18171862)
“I have defeated them all.... I was left with some money to battle with the world when quite young, and at the present time have much to feel proud of.... The Lord gave me talent, and I know I have done good with it.... For my brains have made me quite independent and without the help of any man.”
—Harriet A. Brown, U.S. inventor and educator. As quoted in Feminine Ingenuity, ch. 8, by Anne L. MacDonald (1992)
“Europes the mayonnaise, but America supplies the good old lobster.”
—D.H. (David Herbert)
“This is a world of compensations; and he who would be no slave, must consent to have no slave. Those who deny freedom to others, deserve it not for themselves; and, under a just God, cannot long retain it.”
—Abraham Lincoln (18091865)