Let's talk about money printing and why it matters. There's a chart that shows that when banks give out loans or when the government spends more money than it takes in through taxes, it creates new money that didn't exist before. This is called real-economy money creation, and it's important because it can affect how much the economy grows or shrinks.
The chart shows that when there's more real-economy money being created, the economy tends to grow more. But when there's less real-economy money being created, the economy tends to shrink.
So, how do banks and governments create this new money? When a bank gives someone a loan or a mortgage, it creates a new deposit in that person's account. This new deposit is like new money that didn't exist before, and the person can use it to buy things like a new car or a house. This is called bank credit creation, and it's one way real-economy money is created.
Another way is when the government spends more money than it brings in through taxes. This is called a deficit, and it means the government is spending more money than it has. The government can use this extra money to help people, like by giving out stimulus checks or lowering taxes. This is another way real-economy money is created.
Overall, tracking how much real-economy money is being created can help us understand how the economy is doing. When there's more real-economy money being created, the economy tends to grow. But when there's less real-economy money being created, the economy tends to shrink.
Food for thought: Real-Economy Money Creation
Let's talk about money printing and why it matters. There's a chart that shows that when banks give out loans or when the government spends more money than it takes in through taxes, it creates new money that didn't exist before. This is called real-economy money creation, and it's important because it can affect how much the economy grows or shrinks.
The chart shows that when there's more real-economy money being created, the economy tends to grow more. But when there's less real-economy money being created, the economy tends to shrink.
So, how do banks and governments create this new money? When a bank gives someone a loan or a mortgage, it creates a new deposit in that person's account. This new deposit is like new money that didn't exist before, and the person can use it to buy things like a new car or a house. This is called bank credit creation, and it's one way real-economy money is created.
Another way is when the government spends more money than it brings in through taxes. This is called a deficit, and it means the government is spending more money than it has. The government can use this extra money to help people, like by giving out stimulus checks or lowering taxes. This is another way real-economy money is created.
Overall, tracking how much real-economy money is being created can help us understand how the economy is doing. When there's more real-economy money being created, the economy tends to grow. But when there's less real-economy money being created, the economy tends to shrink.