(1) The main body of money supply is the central bank and commercial banks (including financial institutions that accept demand deposits), that is, the deposit money banking system.

(2) The two entities create their own currencies: the central bank creates cash and the commercial bank creates deposit currency.

(3) The money supply process of the banking system must meet three basic conditions: first, the complete circulation of credit money; The second is to implement the proportional deposit reserve system; Third, non-cash currency settlement methods are widely used.

Under these three conditions, the process of money supply can be divided into two links:

First, the base currency provided by the central bank;

The second is the deposit currency created by commercial banks.

In these two links, bank deposits are the largest part of the money supply, but the basis for commercial banks to create deposit currencies is the basic currency provided by the central bank, and they are always subject to the central bank in the process of creation. Therefore, the central bank has always been in the core position in the whole process of money supply.

Channels for the delivery of base currency

Foreign assets business: mainly buying and selling foreign exchange gold in the foreign exchange market for foreign assets.

Creditor's rights to the government: buying government bonds in the open market, overdrawing or lending directly to the finance, the creditor's rights to the government change.

Creditor's rights to financial institutions: commercial banks rediscount or refinance, and the creditor's rights to financial institutions change.

The process of creating deposit currency by commercial banks is a series of processes in which commercial banks at all levels absorb deposits, issue loans, transfer and settle accounts, and constantly transfer among bank depositors to form new deposits, which eventually leads to an increase in the total amount of deposits in the banking system.