If an economy always grows and for example a company makes more money, creates new jobs, salaries go up then where is this “new” money coming from?
I’m guessing the world doesn’t have a finite amount of money and it just so happens at some points, some countries get more of it. I’m thinking more money gets created when the economy is growing but I’m guessing there are rules around this?
Because I’ve also heard that you can’t just create new money because of hyper inflation I think it happens in Zimbabwe.
So these two thoughts are conflicting and I don’t know the answer.
Can anyone help please?
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Money is anything accepted broadly as a medium for exchange. Cigarettes have functioned as money and so does bitcoin. In modern fractional reserve economies debt is bought by the central bank which creates free bank reserves, which the bank can lend. The lent portion ends up in another bank as free reserves which can now be lent, and so on. Recently the Federal Reserve bought bonds from the Treasury at an unprecedented pace, creating money faster than the economy could produce goods and services that the new money could buy, which tends to make the prices, including financial assets, increase.
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