Learn more about moneyandinvestments with this collection
How to start a successful business
How to build a strong team
How to market your business
Most countries have a central bank that manages the money supply. It is independent of the government to prevent political interference.
The government can implement different types of economic policy, like decreasing taxes, but can't increase the money supply.
The central bank determines how much money is in circulation at a time.
They can authorise the printing of unlimited money to help an economy in crisis, but that's a short-term solution. It doesn't necessarily help with economic growth in the long term and can actually hurt the economy.
When there is more money in circulation, the manufacturers of goods like food, clothing, and cars could respond to demand simply by raising prices. This means you could no longer buy as much with the same amount of money. It is known as inflation.
Inflation of about 2% a year is considered a sign of economic health, but more can quickly damage the economy.
In recent decades, central banks have tried quantitative easing to infuse the economy with cash while maintaining a low risk of severe inflation. The quantitative easing approach is where a central bank increases cash flow by purchasing another entity's bonds.
Anyone can buy bonds from corporations or governments. When you buy a bond, you're really loaning money to the company or government, who will pay it back later with interest.
During the 2008/9 financial crisis and 2020, the United States' central bank bought unlimited bonds from the U.S. government called treasury bonds, loaning the U.S. government money. The government used the money to fund relief efforts.
This isn't the same as printing money. Because of the way bonds are priced, the Federal Reserve effectively lowered the return on them. This incentivises other investors to lend to riskier entities, which should help companies to borrow money to use in projects, growing the economy over time.
When the Federal Reserve pledged to buy unlimited government debt, this means the government could just issue more bonds which the central bank would buy. The government could then use the money from the new bonds to pay off the old bonds, meaning the government never pays back its debt.
Some economists say that when a central bank buys government debt, it's a subversion of a system designed to protect the economy. Others insist that these measures help stabilise economies.
More like this
Explore the World’s
Take Your Ideas
Just press play and we take care of the words.
No Internet access? No problem. Within the mobile app, all your ideas are available, even when offline.
2 Million Stashers
Don’t look further if you love learning new things. A refreshing concept that provides quick ideas for busy thought leaders.
Best app ever! You heard it right. This app has helped me get back on my quest to get things done while equipping myself with knowledge everyday.
This app is LOADED with RELEVANT, HELPFUL, AND EDUCATIONAL material. It is creatively intellectual, yet minimal enough to not overstimulate and create a learning block. I am exceptionally impressed with this app!
Great interesting short snippets of informative articles. Highly recommended to anyone who loves information and lacks patience.
Even five minutes a day will improve your thinking. I've come across new ideas and learnt to improve existing ways to become more motivated, confident and happier.
Brilliant. It feels fresh and encouraging. So many interesting pieces of information that are just enough to absorb and apply. So happy I found this.
I have only been using it for a few days now, but I have found answers to questions I had never consciously formulated, or to problems I face everyday at work or at home. I wish I had found this earlier, highly recommended!
Great for quick bits of information and interesting ideas around whatever topics you are interested in. Visually, it looks great as well.
Read & Learn
Access to 200,000+ ideas
Access to the mobile app
Unlimited idea saving & library
Unlimited listening to ideas
Downloading & offline access
Supercharge your mind with one idea per day
Enter your email and spend 1 minute every day to learn something new.
I agree to receive email updates