reservation

😏Who prints dollars in the USA? 💵💵💵

Most investors believe that the only one who prints money is the government, but this is not entirely true. Let's analyze this important question💡

1️⃣ The first known option is debt. Everything is simple here, the government issues debt, the Fed takes it on the balance sheet and "prints" money for the amount of the debt. The word is printed in quotation marks, because most of the money is issued in electronic form.

2️⃣ The second option is commercial banks. Yes, because there is a reserve rate, banks can over-lend more than they owe. For example, if the reserve rate is 10%, then out of $100, the bank keeps $10 as reserves, and can give $90 as a loan.But the chain⛓ does not end here. For example, someone took this $90 loan and spent it somewhere, accordingly, someone received this $90. Then he took this money to the bank, and again from this 90 dollars - 9 dollars went to the reserve (10%) and 81 dollars - this is already "new" money. And so on, these 81 dollars will create new money 🎯.

✅ This is quite simplified, but it shows how commercial banks actually issue money. And the speed of the appearance of new funds depends on the banks' reservation rate. After the corona in 2020, the reservation rate in the US (and some other countries) was reduced to zero.That is, banks can issue as much money as there is a need for. The only limit is the solvency of the borrower (and the year 2008 showed that banks do not pay much attention to this).

☑️ As for the actual printing of money (in paper form and coins), this is done by the Bureau of Engraving and Printing (Bureau of Engraving and Printing).

#bank #credit #reservation