Printing or removing currency by Federal Reserve

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vassy
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Printing or removing currency by Federal Reserve

Post by vassy » 23 Jul 2017 12:07

Hi,
I recently read that the total amount of money in the world does not remain constant. Federal Reserve/Reserve Bank in each country prints currency as and when required. How do they decide when to print currency or remove currency from circulation? Thanks!

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ghariton
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Re: Printing or removing currency by Federal Reserve

Post by ghariton » 23 Jul 2017 14:10

First, distinguish "money" from "currency". Currency consists of paper (or plastic) bulls plus metallic coins. Money includes this and a host of electronic forms. When a central bank wants to create money, it usually buys bonds and credits the value of the purchase to the purchaser's account, usually via a few lines of computer code. The reverse process decreases the amount of money. In this sense, the vast proportion of money in existence today is in electronic form. Currency forms a very small part. Indeed, the are proposals to abolish currency, or at least limit it to very small amounts (e.g. $10 bills or lesser value). India has just done this, with some fairly chaotic short-term consequences.

Creation or withdrawal of money is one of the instruments of monetary policy, i.e. trying to influence the level and term structure of interest rates, with an eye on inflation, exchange rates, growth in GDP, unemployment, and such. The details are worked out by highly paid gurus.

Currency, on the other hand, is produced to respond to the needs of the public, and mostly to replace bills that wear out or coins that are lost of destroyed. In turn this is indicated by commercial banks' needs to satisfy their customers.

George
The plural of anecdote is NOT data.

bolt
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Re: Printing or removing currency by Federal Reserve

Post by bolt » 16 Nov 2017 22:17

vassy wrote:
23 Jul 2017 12:07
Hi,
I recently read that the total amount of money in the world does not remain constant. Federal Reserve/Reserve Bank in each country prints currency as and when required. How do they decide when to print currency or remove currency from circulation? Thanks!
Hope this helps, its one article of many slighted one way or the another you should read to help your understanding. http://reason.com/archives/2015/08/20/t ... our-friend Good Luck!

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