Central banks & the base
Drive both ledgers
Below: a stacked balance sheet. Top is the central bank. Bottom is a commercial bank — the same one you drove in A3. The two are linked: the bank's reserves on the asset side are also a liability of the central bank. They tick together.
Two counters at the bottom of the widget: Base money (CB liabilities — currency + reserves) and Broad money (currency in circulation + deposits). Watch which one each button moves.
Click QE. The CB buys $100B of Treasuries from the bank. CB Treasuries +$100B, Bank reserves +$100B. The bank's reserves swap places with its securities: same total assets, different mix.
Base money: +$100B. Broad money: unchanged. Nothing has happened to deposits. The household sector has the same checking balances it had before. This is the surprise. (Run QT to reverse it.)
Click Bank issues loan. The bank writes $100B onto both sides of its own ledger — a loan asset and a deposit liability. The CB ledger does not move at all.
Base money: unchanged. Broad money: +$100B. This is the asymmetry that makes A4 worth its own node. The two issuers create different things.
Click Cash withdrawal. Currency in circulation +$100B, Bank reserves −$100B (and on the bank's ledger, deposits −$100B, reserves −$100B). Composition of base money shifts from reserves to physical notes; the totals barely move. This is the daily flow that makes the CB's currency-issuance role visible.
Not the quantity of broad money. The price of reserves (the policy rate) and the rules constraining commercial-bank balance sheets (capital, liquidity, IOR). Cheap reserves → banks willing to lend → broad money expands. Expensive reserves → opposite.
This is why the textbook "money multiplier" is misleading. The CB does not push reserves out and watch them multiply. It sets a price and waits for the credit demand to respond — sometimes for quarters.
'They printed money' usually means base, not broad.
When a commentator says the Fed "printed $4 trillion," they mean reserves — base money sitting at the central bank. That money has to be lent into deposits before it touches a price tag. The 2020–2022 inflation spike was almost entirely a fiscal event (cheques to households, supply shock), not a QE event. The distinction matters every time you read a macro headline.