# Money Creation `Legacy` ### Description Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region is increased. In most modern economies, money creation is controlled by the central banks. The process is often referred to as "printing" money, although most modern currencies are not actually printed on paper but are digital entries in a database. Money issued by central banks is termed "base money". Central banks can increase the quantity of base money directly, by engaging in open market operations. However, the majority of the money supply is created by the commercial banking system in the form of bank deposits. Bank loans issued by commercial banks that practice fractional reserve banking expands the quantity of broad money to more than the original amount of base money issued by the central bank. The central bank creates new money whenever it is needed, such as when the government wants to spend more money than it has on hand. The central bank also regulates the supply of money in the economy to help maintain price stability. This is typically done through a combination of interest rate adjustments and open market operations, which involve buying and selling government securities to manage the money supply. ### Examples - The Federal Reserve (United States) - The European Central Bank (ECB) - Various other central banks ### Further reading - [What is money?](https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/what_is_money.en.html) Article by the European Central Bank - [Federal Reserve FAQs](https://www.federalreserve.gov/faqs/money_12845.htm). What is the money supply? Is it important? ### Acknowledgements - Wikipedia: [Money Creation](https://en.wikipedia.org/wiki/Money_creation) - ChatGPT: "How do governments create money?"