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Valyooo (34.62)

Long term increase in the monetary base?



June 04, 2013 – Comments (1)

Has does the monetary base increase long term?  When the fed expands the money supply it does so by buying treasuries.  When the treasuries mature, the government has to pay back the principal.  This should drain the money supply.  Now as long as the debt keeps expanding, I get how MB can stay expanded, but there have been decades where the MB expanded while debt decreased.  How can this be so?  Keep in mind I am talking about monetary base, not including bank credit

1 Comments – Post Your Own

#1) On June 05, 2013 at 1:21 PM, Melaschasm (69.47) wrote:

While the main way the Fed influences the monetary base is through buying and selling T-bills (and other assets), long run changes come from physically printing money, changing the rules regarding bank reserves, cultural changes in where money is kept (using plasitic, not cash), and a few other sources I am not remembering at the moment.

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