If expansions in base money were correlated with predictably higher GDP growth, and contractions in base money were correlated with predictably lower GDP growth, the slope of the line would be flatter and the fit would still be reasonably good.
You could even pledge enough money to base jump from the top of the tethered research tower, which will be held aloft by helium balloons.
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"We were told that rents were not dropping dramatically so we weren't expecting to save a lot of money on base rent, " said Steven Kittrell, managing partner in the Washington office.
Short-term interest rates of 2% are consistent with money demand of about 10 cents of base money per dollar of GDP.
The money received in payment disappears, which shrinks the base money supply.
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These crises were not caused by money that was too stable in value, but rather a short-term inflexibility of the base money supply around the harvest season.
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Private banks, via the issuance of uncovered money substitutes, which springs from the ability of those banks to pyramid deposits on top of base money when making loans or purchasing assets.
The Federal Reserve has the responsibility today of increasing or decreasing the base money supply.
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The Federal Reserve already increases and decreases the base money supply on a daily basis.
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If the ratio of broad to base money were constant, such fears would be warranted.
The possibly sharp increase in nominal interest rates would tend to reduce demand for base money.
Expand the quantity of base money, and it turns out that velocity falls in nearly direct proportion.
Once banks start lending again and expanding base money through the fractional reserve system, M2 could increase exponentially.
To increase the base money supply, the Federal Reserve typically buys something, usually a bond of some sort.
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All this means is that the base money supply is adjusted at different times, and in different quantities.
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It would not work to allow private entities to create base money dollars.
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Alternatively, the Fed could leave the monetary base alone, and allow prices to restore the balance between base money and nominal GDP.
To decrease the base money supply, the Federal Reserve typically sells something.
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When the quantity of base money grew rapidly (it has tripled since mid-2008), its growth in dollars was almost matched by bank reserves.
Base money is now rising at an annual rate of 20.5%, good news for those who think that inflation is a monetary phenomenon.
On the other hand, if the economy recovers sufficiently fast and the banking system is quickly recapitalised, the demand for base money would on balance increase.
The nearly 200% increase in the supply of base money over the past 36 months would, in normal times, be expected to produce inflation, if not hyperinflation.
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All else equal, such a rapid increase in the quantity of base money would soon after result in a rapid and general increase in prices throughout the economy.
But when analysts saw the quantity of base money double during the last quarter of 2008, they were justifiably concerned about the increased likelihood of future price inflation.
Thus, the total amount of base money in existence increases.
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So far, the Bank of Japan has pumped up the base money supply (along with expectations) and the yen has fallen 20 percent relative to the dollar since September.
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This is paid for by newly-created base money.
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Instead, policymakers continue to replace old debt with new debt, shift it from the private to the public sector, and increase the amount of base money in the system to fill the gaps in both bank and government balance sheets.
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After the credit crisis set in and the healing aspects of deflation began to take hold, central banks rapidly expanded the supply of base money in an effort to quickly erode the purchasing power of their currencies and bring real estate prices higher.
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