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Currency release
A means of stimulating economic development
What is currency release?
Monetary easing, or monetary easing, refers to the government or central bank implementing loose monetary and credit policies in order to stimulate economic activities.
Releasing money is a basic means to stimulate the economy. The advantage of releasing money is that it can dilute debt and reduce capital costs, whether for the government, enterprises, or individuals. But the sequelae are that huge amounts of money and credit are continuously injected into and stranded in the financial system, causing the financial system to deviate from the real economy.
Main applications:
1. Control currency issuance.
2. Control and regulate loans to the government.
3. Promote open market business.
4. Change the deposit reserve ratio. The central bank controls commercial bank loans and affects the credit activities of commercial banks by adjusting the reserve ratio.
5. Adjust the rediscount rate.
6. Selective credit control.
7. Direct credit control.
For example:
For example, if the central bank prints an extra 100 million yuan, let’s see what happens.
(1) The money will be borrowed from the bank first, because the central bank is the bank’s bank. When the bank gets the money, it will quickly lend it out to earn interest.
(2) The bank told the boss Xiao Hei that there is a discount now, and the interest rate for loans over 5 years is only 4%. Xiaohei saw that it was quite cheap, so he borrowed 99 million yuan to invest in a new factory. Xiao Ming came to apply for the job, and Xiao Hei offered him a salary of 10,000 yuan.
(3) Xiao Ming received a monthly salary of 10,000 yuan and immediately prepared to buy a house.
Although he could not buy it with the full amount, the bank said that he could borrow 1 million yuan, and the monthly payment of 10,000 yuan was enough. Enough, the house is done!
(4) Two years later, Xiaohei Factory made a good profit, and 99 million was paid back in advance. Xiao Ming’s house has also been moved in. Xiao Hei got a factory with an annual profit of tens of millions, and Xiao Ming got an apartment, a job, and a monthly payment of about RMB 4,000. They were both painful and happy. And the bank also earned a lot of interest. Economic success is boosting and everyone has a bright future. This is the story of currency depletion.