Track A · FoundationsNode A4
Central banks & the base
Layer 1 · Pocket
~ 30s readThe thirty-second answer
What is this?
Modern economies have two money issuers. The central bank issues currency and bank reserves — the monetary base. Commercial banks issue deposits — the broad money you actually spend. Most money is the second kind.
Why should I care?
Because "money printing" usually means base printing — and base does not become broad money on its own. It's why $4 trillion of post-2008 QE didn't ignite consumer inflation, and why $2 trillion of 2020 fiscal-direct-to-household transfers did.
Two issuers, two ledgers
- Currency + reserves
- central bank
- Deposits (most $)
- commercial banks
- Base money grows when…
- CB acts
- Broad money grows when…
- banks lend