In fact,a quick glance at the historical values of the u.s. dollar versus the money supply, reflects this point definitively for the inverse relationship is obvious.
The money supply being endogenously controlled by the banking system means that the Fed can influence the cost of money, but cannot completely control the supply of money..
No country facing enormous budget deficits,rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation.
In fact, a quick glance at the historical values of the US dollar, versus the money supply, reflects this point definitively for inverse relationship is obvious.
But, if all money is borrowed from the Central Bank and is expanded by commercial banks through loans only what would bereferred to as the"principal" is been created in the money supply.
In addition, if any of these dollars are deposited in banks which then hold them as reserves, the money multiplier swings into action, and these open market operationscan have an even greater effect on the money supply.
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