GOLD 0.51% $1,391.7 gold futures

Timber, the easier way to explain what you are on about is to...

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    Timber, the easier way to explain what you are on about is to explain the difference between monetary base and money supply.

    Cash = debt or to use a modern term, credit.

    When banks sell their bonds into QE, the cash sits in their reserve account. You might say, but how does the Fed pay for these bonds that it buys every month? Well, they don't print money. They actually use the commercial bank reserves to pay for them. And they do that by providing the cash in their reserves as part of an expanded monetary base for the Fed. Confused?
    I went to Wikipedia to get an explanation of this and this is what it said:
    In economics, the monetary base (also base money, money base, high-powered money, reserve money, or, in the UK, narrow money) in a country is defined as the portion of the COMMERCIAL BANKS' RESERVES THAT ARE MAINTAINED IN ACCOUNTS WITH THEIR CENTRAL BANK PLUS the total currency circulating in the public (which includes the currency, also known as vault cash, that is physically held in the banks' vault). The monetary base should not be confused with the money supply which consists of the total currency circulating in the public plus the non-bank deposits with commercial banks.

    Its one massive round robin if you ask me, and the thing that concerns me is how stable the commercial bank balance sheets are given that their reserves are being used to buy something twice.
 
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