In general, the increase in the money supply. It takes place when: – banks grant loans to their customers, thereby creating new claims and liabilities; – the central bank makes money available to the banks under certain conditions, also by purchasing foreign currency. – The constant process of money creation is matched by an equally constant process of money disappearance through the repayment of loans and the sale of foreign exchange. – The credit balances of the public at the credit institutions, which were created essentially by the credit business of the banks, represent the most significant part of the money volume. Accordingly, the bulk of payment transactions is carried out by transferring funds to banks’ sight accounts. – See aggregates, monetary, specialized banking system, money market operations, money creation sector, credit money, liquidity position, reserve requirement. – Cf. ECB Monthly Bulletin, October 2011, pp. 73 et seq. (banks’ behavior over the course of business cycles).
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