Questions regarding the supply of money and money creation.

Economics Economics Questions
1

Hello! [:)]
I have a few questions that I hope that you can help me with. I made a quick search, and looked for a thread where my questions were answered, but I could not find any. I apoligize if I did’nt search hard enough. I also apologize if my english is’nt good enough (I understand english well, but I suck at expressing myself)

These are my questions;

  1. If I am correct, the Fed can expand the money supply by simply writing people checks, and the Fed does this when it buys bonds. But how can this expand the money supply in the long run? Does’nt the money get destroyed when the money is paid back? Does the Fed have to buy stuff like chairs, houses, tanks and new windows if it wants to expand the money supply?

  2. How are new coins and bills created and distributed?

  3. If a bank creates new money thanks to the Fractional Reserve System, and if the created money is lended to a guy who does’nt pay the money back, is the money in the soceity permanently?

I might return with a few more questions regarding all this btw.

Thank you all for your answers!
Sebastian L

2

Hi Sebastian,

somebody might answer your questions here, but to really understand the mechanisms it’s probably best to read something like “What has government done to our money” by Murray Rothbard first. It’s a pretty quick read an it will answer many of your questions.

You can download it here:

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I thank you for your reply. I’ll take your advice and read that book. [:)]