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@ śatosha
2025-02-12 03:35:48
Now ..of course deposits baloon out .. because let's say a bank makes a million dollar loan .. the normal practice is to send the money directly to seller through an escrow .. as in case of a home mortgage .. but the seller .. so that money doesn't come immediately back to borrower account ..
But seller will obviously deposit money for short term in his bank ( till he acquired a replacement asset ) .. this has kind of multiplier effect on money supply ..
That is why Fed needs to either inject liquidity or tighten the money supply to control inflation .. to their 2 percent target ..