What is a monetary policy

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As you can see, none of what you just said made sense. As you might expect, your explanation only caused your new boss to raise an eyebrow. So the money supply is like some sort of magical money machine. Well here at the central bank, we dont actually issue currency. Instead, we just keep a reserve of reserves, as we do for all other government obligations. You were a little taken back by this admission. Wait, you mean the government is giving you money. Have we told the world, or is it just a big secret. You cant really just give the world the secret to magic money. All you have to do is make it clear that the reserve requirement is a percentage of all the governments bonds. Then, the people will understand that they need to maintain this reserve, just like any other obligation. This, I didnt realize the central bank had such a large amount of government bonds on hand. Because unlike the rest of the money you just gave me, the government bonds are backed by our full faith and credit. This means that if the government fails to pay, your bank will cover the loss, and you dont even have to take any losses. I cant tell you how useful this is when our national economy suffers a sudden downturn. At the end of this explanation, you were completely convinced that the government was planning to bankrupt your bank. You left feeling more nervous than ever, but also with more questions than ever. Why not just just give people the money they need right now, instead of waiting until later. It would be much easier to just tell everyone to use up their entire money supply right now, but that would ruin our reserve of bonds, which is whats keeping us solvent right now. We have the bonds of other countries, but we also have reserves the government owns and doesnt have to use for other obligations. We have nothing left but a reserve of bonds. Theres a law called the Federal Reserve Act that protects us. 1,250 to provide everyone with their full money supply, no matter what needs they have. If thats true, and you can maintain two percent reserves and still satisfy everyones needs, what does that mean.

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