The Central Bank has clarified that money printing and broad money supply are two distinct concepts, following recent public debates on the issue.
In a statement, the bank explained that “money printing” commonly refers to the Central Bank directly injecting new funds into the economy, most often by purchasing government securities. Such actions increase the Bank’s holdings of government securities while introducing new liquidity into the system.
By contrast, the broad money supply (M2b) is a statistical measure of the total money circulating in the economy. It covers not only currency in the hands of the public but also includes loans granted by the banking system to the private sector, to the government, and to state-owned enterprises, as well as the foreign assets of banks.
The Central Bank said that equating movements in M2b with money printing reflects either a lack of understanding or an attempt to deliberately mislead the public. (Islandnews)
