Money Creation and Destruction

money creation and destruction:

the initial creation of money is of course by government, which then flows through the economy, passing through many hands, and the government, through central banks, remains the ultimate creator of money. credit systems later evolve through private banks and their lending and the distinction may not be clear.

the increase in credit in economic systems and the decline of cash involvement and the rise in debt and risk in business deals, and the subsequent failures and bankruptcies thereof, results in loss of capital and what amounts to destruction of money and credit as failed economic projects must be written off. even cash sums involved may in effect be lost from the system as cash is hoarded in the event of risk.

successful business ventures create capital and only increase the flow of money and credit in the economy.

in recession, if we assume a decrease in the money supply, and the resulting deflationary consequences, can the government remedy the economic situation by creating money?

without money, the economy stalls.

CLEARCHARGE