- Central bank money (all money created by the central bank regardless of its form (banknotes, coins, electronic money through loans to private banks)
- Commercial bank money (money created in the banking system through borrowing and lending) - sometimes referred to as checkbook money
When a commercial bank loan is extended, new commercial bank money is created.
As a loan is paid back, the commercial bank money disappears from existence. Since loans are continually being issued in a normally functioning economy, the amount of broad money in the economy remain relatively stable.
Because of this money creation process by the commercial banks, the money supply of a country is usually a multiple larger than the money issued by the central bank; that multiple is primarily determined by the reserve ratio set by the relevant banking regulators in the jurisdiction.
well, I am not that good economist, but I know 1 thing,
I TRy to say it simple
1800, Money were metals, Gold, Silver, Bronze Iron etc
Metals, sprecially Gold is almost eternal cause no very low oxide so it can stay for centurires and more,
people trusted metals for that, for example you exchange and store in metal so to use it in another time, but No one other can haddle them,
that means metal is Ploutos, PlUTO was the God of the underworld. all plutonic rocks belong to him,
so I use and store in metal, then is like return the plutonic to pluto,
why i say that,
lets see, paper are easy to corrupt, that means they are not like metal,
paper money are 'imaginary metals', AND THAT IS THE POINT,
example,
in 1850 about have silver or gold Dolllars in USA, that means each dollar was for example 1 gr of gold,
then paper money, each paper supposed to have its miror in gold, that means 1 paper money unit could cost 1 gr of gold, so 1 kg should be 1 kg of gold means 1000 paper money units. with time we see that 1kg of gold cost 10 000 paper unit money, that means each paper money unit now is 0,001 gr of gold,
and that is the role of the bank, and interest,
interest is killing your money, although you believe it make you rich, in fact it is killing you with 2 ways,
1rst way, you had 1000 money units 1 kr of gold, and bank has 100 kgr of gold, that means 100 000 money units in market,
the time that bank cuts 1 more paper money unit you are cheated, and you are robed, since 100 001 money units is another ballance among paper and metal money,
2nd way, you have a small field, a small hotel, a small corporation, you put the money in a bank, Bank in order to give you the interest, is giving Loan to another, the one who took the loan buy the area next to you Builds a bigger and modern corporation and slowly puts you out of market, well the system had worked, you took your interest, but your corporation is destroyed,
there is also the market way,
what is that, the cheap industry products that are you buy expensive due to advertise and destroy your economy,
for example cotton or wool are considered Healthy and eco products, the world used them for thousands of years,
then cheap plastic clothes enter the market, ( i am not talking about parts, like rain coats or boots), new chemicals etc, that means that the new products will replace the old, bring allergies pollution environment etc,
yes Bank tells you that the new industry has brought 1000 places of work, but it does not tell you that destroy 2000 places of work,
1000 of wool farmers, and 1000 due to machines work.
so if you watch tv, at least in Greece every 2 minute Banks are advertised, and in the middle time Banks products, buy that its good, belongs to XYZ Bank, buy that is strong, member of XYZ Bank and finnaly XYZ bank the best bank.
that means that that the 'treasure keepers' keep the metals in the treasury, and destroy our working hours or our paper money, and we don;t realize it,
in fact huge empire corporations are build from that, and destroyed in one night by their builders,
just think, your money is a share in gold system stock exchange, you buy for example shares of a corporation which you trust,
the owners take your money, slowly destroy the corporation, and then with your money build another stronger.
in fact that is what is happening,