Season 1 · Episode 434
What do central banks do?
When central banks declare a new interest rate, how does that magic into existence? Steve explains. And what does their work do to the money supply?
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
December 18, 202439m 0s
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Show Notes
When central banks declare a new interest rate, how does that magic into existence? Steve explains how they trade in bonds, to drive yields close to their target rate. If they are buying up bonds held by pension funds and the like, are they also adding to the money supply? Could that have more impact on the health of the economy than playing with interest rates? But the problem is, the money created is circulating in the financial sector. If the central bank really wanted to boost the economy, it should find ways of pushing new money to those less well off.
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