How Central Banks Control the Money Supply With Interest Rates

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Information How Central Banks Control the Money Supply With Interest Rates

Title	:	How Central Banks Control the Money Supply With Interest Rates
Lasting	:	14.22
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Views	:	160 rb

I just uploaded the next video in this series, which is about quantitative easing: youtube/ZbqtpKk6iC8
Comment from : Money & Macro

Where you leave that colateral (aka goverment money) tends to be more important than reserves, or what price of money or interest rates would do an economy when is oversterilized or runs dry on quality colaterales and nobody wants to let money each other, so Quantity of money and Availability of money>price of money
Comment from : Camilo Guzman

Thank you
Comment from : Duy Anh Tran

monetary policy is not effective
Comment from : Jonathan Evans

BANK OF AMERICANSHAR MIN AUNG(CEO)
Comment from : Kyal Tagon

I want to add inflation targeting does not work in most countries except some advanced countries (like US/UK) where they import goods The reason is there are a lot of informal economies, supply-side constraints (esp agriculture is dependent on climate), asymmetric information, regulations, etc
Comment from : HARIOMHARI

very informative Thanks
Comment from : Muboriz Mirzoshoev

Actually, money is a matter of trades The central bank is the middle man who exchanges apples for lumber from the producer of apples to the producer of wood that doesnt need apples The central bank exchanges his apples for money so that the producer of lumber can get a saw from the person who doesnt need apples or lumber Not literally but the idea is right if you understand correctly The central bank exchanges goods for money from in compatible sellers so they have a common currency They make a profit for there service As do the producers of apples, lumber & saws
Comment from : djexclusivee

It’s amazing that you made a video on a topic and didn’t explain it
Comment from : Hosoi Archives

Well explained Thank you
Comment from : Iosefa Andrews

So, reserves are basically in the form of currency notes, right? I am feeling a bit thrown off by the "money that only banks can use" expression and not sure how to interpret that
Comment from : Rhombus X

The Fed Funds Rate and the Discount Rate are pretty blunt tools in all honesty brThey may make credit cheaper by setting a lower floor for interest rates, but that won’t necessarily translate into a great demand for loans
Comment from : Cameron Dye

It’s nice to see more and more economists taking the engineering approach to economics I’ve always liked the work of people like Anwar Shaikh and Stephen Keen They look at how the economy works in the real world, not how it “should” work brbrThis channel does a great job explaining these complex topics in an entertaining and easy to digest way Keep up the great work!
Comment from : TheCommonS3Nse

Thanks for the video
Comment from : Glenn Zarmanov

Time is Godly power that is why some watch is really powerful But real and fake make difference
Comment from : Eric Pham

In fact if increase interest encourage investment and lending more but if the people use loan to produce create jobs but if they only borrow small to spend daily needs the it destroy future because no one can pay back
Comment from : Eric Pham

The bank are not problem mostly but some hidden power print more money of some small countries exchange for us dollars and ride so the question is should a single currency help better for everyone
Comment from : Eric Pham

Well explained
Comment from : AusforAus

Great video but you lost me for showing Prague on "Underperforming economy" 😀
Comment from : Antonín Daněk

superb video very very clearly explained !!
Comment from : Pr S

Hi Joeri Great content! I understand you had to skip some things to make an approachable summary, but I think a follow-up video describing central bank Open Market Operations enwikipediaorg/wiki/Open_market_operation is needed Especially contrasting OMO versus central bank rates and versus QE
Comment from : Werdna

I would say the Federal reserve in the United States is not controlled the money very well 30 trillion dollars plus in debt?
Comment from : Truthsabre7

Yes Finally people can be quiet about the bogus quantity theory of money in your other videos
Comment from : Jack Hopewell

So how do Central Banks control or stimulate an economy if they no longer do it by regulating reserve requirements? Unless I misunderstood your video, if there is demand for credit, banks will create credit The check or limitation to unlimited bank loans are the depositors to the banks fearing credit quality and bank runs?
Comment from : lakeguy65616

Ty
Comment from : Alan R

Why are the interventions of Central Banks not reduced to a computer algorithm?
Comment from : Paul Morran

Thanks for the great videos, Joeri Good coverage, without too much focus on non-traditional ideologies regarding monetary policy I'll be recommending some of your videos to my secondary/university econ students
Comment from : Zakary jay Nicholls

If the economy is expanding rapidly and the labor market is tight, what might happen if the economy did not have any central planning? One simple answer is that consumers would continue to spend causing consumption inflation instead of more money supply inflation; however, in either case there would be inflation, but consumer based inflation may cause incomes to increase more and over time, in a free market economy would definitely weed out the inefficient producers as employees gravitate to higher paying jobs No minimum wage increases needed just like what has been the case over the last several years Banks would raise their interest rates to attract more capital as more opportunities continue to rise and the lowest paying jobs transferred to countries with low skills or a competitive advantage because low skilled labor will be demanded by companies that take the economic opportunities, for starters The free market system is fair and when left alone, eventually cause a rising tide Problem over the last 100 years is the growth of usurping, corruption, game playing at the defendant's expense, etcin the USA anyway
Comment from : Timothy Smith

thank you so much, this video helped me to do my take home exam
Comment from : Elif Aslan

Why don't the take money out of circulation that would Stop inflation
Comment from : PShawtx

Thank you 🙏🏻
Comment from : Mark Rafferty

Interest rates are at zero
Comment from : Daniel Kohen

Where does the central bank get the money to pay interest on the reserves deposited by commercial banks?
Comment from : Paul Connor

I don't understand how can banks hold too much reserves and why would they want to keep their reserves at the central bank
Comment from : Dont you fucking uwu me

Is that Ed Begley Jr at 8:12?
Comment from : Timothy Hansen

I love it very clean on Monetary Policy
Comment from : Arthur Smallz

I love the way you teach
Comment from : Godwin Numaworseh

Keep the illusions going Inflation measures are ludicrous The property ponzi scheme is the only game for banks So called supply and demand and free markets do not exist
Comment from : Blazer K

JESUS, I CAN'T BELEIVE I FOUND THIS CHANNEL! I HAVE TO SAY, I'VE YOUTUBED SOME VERY SPECIFIC AND INTRICATE ECONOMIC CONCEPTS THAT SHOULD'VE PRODUCED YOUR CHANNEL ON THE OTHER END OF THE SEARCH, BUT IT NEVER DID I LITERALLY FOUND THIS CHANNEL BY ACCIDENT AND THAT IS CONCERNING
Comment from : Customer Support

i’m ready to buy a notebook and just take notes off of your videos dude lol
Comment from : Bob

Brilliant summary Hope more people view these, as there is a lack of understanding of macroeconomics
Comment from : Mike Van Wyk

this knowledge for trading forex right ?
Comment from : Didik Purwanto

This guy looks like Elon Musk
Comment from : Joseph Montante

This channel is UNBEATABLE!!! Thank you so much for your hard work!
Comment from : Robert Zell

That is exactly the explanation I was looking for Thanks!!
Comment from : Valentín Viola

So, income disparity comes from the fact that some people (banks) are allowed to print and multiply virtual money (subject to rules) whereas other people (labourers) are not allowed to print money and do not get fair wages Since inflation is a given in fractional reserve banking based economy, if the wage increase does not match the inflation rate, some people become poorer over time, just like that, out of no fault of theirs Correct?brSecondly, people like doctors/consultants/lawyers/engineers who charge for services with no substantial costs/expenses can literally print money competing with banks So also for example, software developers, or musicians, or artists, who directly sell unlimited copies of one product to millions, thereby accumulating virtual money with negligible input costs Correct?brEffectively, today, money is not a zero-sum game as accounting might make you believe Far from it, you can multiply money too, if you have a skill that people value Correct?
Comment from : Anand Sharma

when you say the central banks raise or lower interest rates - are you talking about the interest rate at which they lend out money, or the interest rate they offer for money to be stored with them, or both? Are the interest rates the same This is confusing for me, as the flat term 'interest rate' is always used, but would they offer the same interest rate for borrowing and storing?
Comment from : Dean Moriarty

thank you so much for this video! I'm struggling in econ class but this really helped
Comment from : chlsey

The purpose of the commercial banks is to try to lower the interest rate downwards because high interest rates only bring in risky borrowers ??brIn an environment of lower interest rates is it convenient for commercial banks to lend according to what you say or have I misunderstood??brbrThanks In Advance
Comment from : STOCKS & COFFEE

Perhaps the reality is that the low interest rates and high lending are resulting in money pooling in those areas of the economy where consumption is primarily funded with debt such as housing and increasingly, carsbrbrIt takes a long time to pay back the loans and mortgages used to buy capital in these debt-heavy markets, so the general rise in inflation is slowed immensely
Comment from : MUSTASCH1O

good video but missed such an opportunity to talk about 'the interest rate fallacy' Low interest rates are indicative of tight monetary conditions and high interest rates of loose monetary conditions Interest rates are POSITIVELY correlated with economic growth
Comment from : John

Not all central banks influence monetary policies via interest rates For example, countries like Singapore, control money supply managing exchange rates That's as far as I know Will you be able to examine deeper monetary policies via the exchange rate, how it works?
Comment from : Paul Sitoh

It may be a kinder gentler form of slavery but the borrower is always a slave to the lender The important thing is to try and understand how the system works and try to live your life debt free
Comment from : Danny

If a bank has too many reserves it makes sense that they can stash these at the CB or loan it to other banks But I don’t understand how increasing their lending spends reserves? When they make a loan to a person or a firm it’s bank deposits they create, right? So where does the reserves fit in?
Comment from : Kvikende

This video is replete with the term reserves Can you please clarify what does this term reserves mean? And the video is good
Comment from : ARITRA ROY

Fun fact : that huge building looked like a PS5
Comment from : Mohamed Moustafa

The only thing they control is perception, which makes us extra blind to the cliff we are running over
Comment from : Jacob Klein

Do all central banks around the world seem to follow the same principles involving the relationship between unemployment and interest rates? Curious if there are 'experiments' in other countries testing the boundaries of this theory I imagine that like so many other policy concerns there are going to be idiosyncracies that don't generalize well to all countries, however
Comment from : DankWarMouse

3:28 Banks have the ability to create money through loans (to some extent), so why increase lending to the general economy in the case of having excess reserves? I don't recall if it was said explicitly in these videos, but others that I've heard discuss this (and go against the MMM) indicate that banks don't lend from reserves Without that being explicitly said, I would think that money creation for loans would imply this as well What am I missing?
Comment from : Dillinger Siadak

I would like to see this guy play Chair the Fed game, and explain the reasoning behind his choices That should be interesting
Comment from : OHM-968692

What's the money supply?brbrAlan Greenspan said central bankers can't control the money supply because they can't even define or measure it brbrThey don't even bother measuring M3 because they don't know if they''re double counting and overstating the money supplybrbrThe relationship between "money supply" and inflationary has totally broken down so they're reduced to manipulating public psychology
Comment from : Hemi Edwards

Let's get this straight: coronavirus has not 'ravaged economies' It is a middle-ranking viral outbreak that never did have the potency to even mildly disrupt tradebrWhat has done the ravaging and continues to carry out its destruction, is the huge over-reaction of the lockdowns perpetrated, as if in perfect concert, by the governments of the Western economiesbrThis is not just a semantic minor detail To keep on speaking of this as though some kind of health issue is to fuel the situation that has been created Those who have any interest at all in repairing our economies and restoring the right to trade need to call things what they really arebrThis is not a health crisis This is a coup
Comment from : Edward McLaughlin

Very informative and well explained Content! Greetings from Germany!
Comment from : Christian Singer

Can you do a video on Tether? And stable coins in general
Comment from : S Gill

Awesome video content, keep up the good work!
Comment from : Lex Mooij

Inflation has occurred It's just in the prices of capital goods, instead of consumer goods People should look at the S&P500, instead of the CPI This way the economy can, in theory at least, grow forever, but at the cost of eventually making capital goods unaffordable
Comment from : Tuppoo94

You know for a dutchman you sure do use a lot of Rands 🤔
Comment from : Saint Michael

Ive heard that as populations increases, wages drop dramatically Is this true?
Comment from : Fenny

Thanks! Super content, super ilustrative take my like dear sir!
Comment from : omar zuniga

Does this mean that countries with very high inflation, no or negative economic growth, high interest rates and rather high unemployment are bizarre case studies (or failed economies)? I don't really expect a full answer here, although I do hope you do a video about Argentina It's more of a comment to boost the algorithm and let you know I appreciate your work, in depth analysis of a topic, almost full lectures, not short and only entertaining videos Good job! I hope the channel grows!
Comment from : Luca Lazcano

How does targeting 2 inflation encourage people to spend their money? Isn't the relevant metric for whether people want to spend their money the inflation compared to the interest they get on their investments? So it seems to me that monetary policy only encourages people to spend their money if it causes inflation to go up more than investments So it seems to me that the current central bank policies have precisely the opposite effect: prices of ordinary things have not risen much, but investments like houses and stocks have risen massively What am I missing?
Comment from : Jules Jacobs

very clear about the banking cartel
Comment from : kenzong

''The central bank believes xyz ''brbrAh so you're admitting that most of this policy isn't actually based on economic science but instead banker superstition so what does the actual science say in this case or let me guess it doesn't actually exist and its mostly circumstantial evidence? Really it would be nice to have an actual video on this topic that goes into depth of this 'theory' that we are all spoon fed to believe as I was in economics class in high-school So great having to regurgitate on exams what are essentially basically superstitious 'facts' and be judged on whether I can regurgitate said superstitionsbrbrFurther more you say that the central bank believes that interest rates should be higher when there is low unemployment in order to cool down the economy, decrease spending and inflation while interest rates be lowered when unemployment is high to encourage investment, spending and increase inflation brbrHow is this working out for Japan with extremely low unemployment rates or for the US with equally quite low unemployment rates How come they have literally zero interest rate in this case for decades now? Doesn't seem like these central banks believe or adhere to this policy in the slightest Also for the ECB this doesn't seem to really hold much of any water as the ECB also has low interest rates while EU unemployment might be high in some areas and extremely low in others, it is still average (8) across the board, yet again we see absolutely non-existent interest rates So none of the major banks in the world are adhering to this 'philosophy' that is proposed in this videobrbrBut You actually seem to have legitimately brought up these very points at the end of the video, so massive kudos to you and appreciation for that to you in being realistic in this aspect It would still be interesting to see what the actual science says on these matters (if possible) and I'd love to hear what your own thoughts are on these matters and how they can be solved
Comment from : BrutusAlbion

But why wouldn't the Commercial Bank set it's own interest rate, since when it makes a loan, it creates that money by typing it into the Lender's Account? I thought that the Commercial Bank does not borrow money from the Central Bank before it lends?
Comment from : Platypus Paws

Just came across your channel, for someone who wants to learn about macroeconomics and how does various factors effect money flow this is simply too good, please continue the good work and thank you
Comment from : Sukrit Prakash

Very good research! No open questions Its all explained in a full circle and i do understand it, at least in theory I really appreciate it, thanks
Comment from : Brandon

Very clear and insightful explanation!
Comment from : l a

No modern customer ever checks a bank's reserves That's what people would do if banks had no backstop
Comment from : Gerry Bourdeau

So governments have to decide between:brbrRaising Interest Rates: which will increase unemployment, thus annoying the local citizens (who vote for the government) but will attract foreign investors brbrORbrbrDecreasing Interest Rates: Stimulating economy, decreasing unemployment but scare off foreign investors (due to risk that inflation will erode value of currency)
Comment from : C F