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How money is created


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Money is created when the Central Bank purchases bonds from the government. 

 

The government bonds are "debt" which is repaid in taxes to the Central Bank with interest. 

 

When this cycle is executed it is known as a "fiscal" policy. 

 

The Central Bank can also lend to retail Banks and other businesses creating money in the process.

 

This is how money is created in today's world as far as I know.

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On 5/23/2021 at 5:40 PM, Connor said:

Money is created when the Central Bank purchases bonds from the government. 

 

The government bonds are "debt" which is repaid in taxes to the Central Bank with interest. 

 

When this cycle is executed it is known as a "fiscal" policy. 

 

The Central Bank can also lend to retail Banks and other businesses creating money in the process.

 

This is how money is created in today's world as far as I know.

The link below is the Bank of England's public response to Quantitative Easing. 

 

https://www.bankofengland.co.uk/monetary-policy/quantitative-easing

 

Quantitative Easing (QE) is the program which is used by the Bank of England to issue policies which allow the purchase of government bonds along with corporate stock and other assets which thus creates money in the process.

 

The latest round of Quantitative Easing (QE) created £875 billion pounds for government bonds which essentially is public debt that is a financial response to the COVID19 pandemic. The Bank of England also issued £20 billion to purchase corporate stock. Totalling the amount of Quantitative Easing (QE) for November 2020 at £895 billion.

 

Quantitative Easing was introduced as a emergency program for the 08/09 global crisis. Since then the Bank of England has issued Quantitative Easing (QE) around every 2 years and the amount of money being "created" has grown exponentially from £200 billion in 08/09 to £445 billion in 2016 and then to £895 billion in 2020.

 

 

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