Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Create Money Through Lending
Most people think central banks print physical cash to control the economy, but that is only a tiny fraction of the money supply. In this episode, Lucas and Luna unpack how the Federal Reserve actually creates new dollars through its balance sheet by lending to commercial banks in the overnight repo market. We look at why liquidity injections happen during stress periods like the March 2020 volatility spike, and how these mechanical operations differ from quantitative easing. By understanding that most money is digital bank reserves created through debt, you will see why interest rate changes…
The skinny
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