The central banks are the ones that print money in an economy. So, they can’t run out of money, right? They just print more. Imagine if central banking could be as simple as that.
This is an exploration of the complexities of quantitative easing and interest rate policy that may help to show central banks where they can limit their ability to raise rates. What time they should ease. Or, why the BOE in September may have been a warning sign for the rest of the world.
What’s the problem?
As the name suggests, central banks are banks. They make money by charging transactions, lending money, and other bank-related activities. Banks, not for the common people. That’s why central banks are often called “the bank of the banks”. The national Treasury receives the profits from central banks. But, if central banks lose money, then that goes in reverse: i.e., the government has to step in and “pay back” some of the profits.
Why don’t they just print money?
Asset segregation. What’s that? It’s when banks keep their own assets separate from the assets of their customers. Banks can have assets that they own, such as buildings or their own money. And they can keep things or clients. Central banks also do the same thing