Monetary creation

Money creation is the total mass of money in circulation at any given time. These are the central banks (ECB, FED, BoJ, BoE ...) which determines the rate of growth of the money supply. Money creation depends directly on the monetary policy adopted by the various central banks. These elements play an important role in the financial markets including forex, the currency market.

The money supply is measured by means of economic aggregates. Without going into details of various aggregates, they are distinguished by different degrees of liquidity of financial instruments that compensate. Central banks will thus speak of three different aggregates when reporting on the money:

- M1: Tickets + parts + sight deposits (current account)

- M2: M1 + Booklet + A + PEL Codevi

- M3: M2 + deposits + mutual funds + Fund + treasury bills + commercial paper

The money supply, so it is not only paper money (notes and coins), but everything that makes up the reserves of purchasing power of different economic actors. However, we are now witnessing an increasing share demonetization including the use of credit cards or bank transfers.

Can be said that the euro is in terms of currency notes in circulation the more common before the dollar although the latter retains its hegemony in world trade.

The aggregate used by central banks since it is the M3 is wider. Monetary policy is based on this aggregate. However, the money must be controlled because it creates inflation. So they try to control it including adjusting interest rates.