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Article: Foreign holdings skew money supply.(Commentary)
- Article from:
- The Washington Times (Washington, DC)
- Article date:
- November 18, 1996
- Author:
CopyrightCOPYRIGHT 1996 News World Communications, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The Federal Reserve controls the U.S. money supply by buying and selling Treasury securities. When the Fed buys securities, it pays for them by creating new money; when it sells them, the money supply shrinks. Through a continuous process of buying and selling, the Fed attempts to provide the right amount of liquidity for our nation's economic and financial transactions. Too little money can trigger a credit squeeze that might send the economy into recession; too much money can cause inflation.
A major component of the money supply is currency. As of Oct. 28, there was $390.9 billion of currency in circulation out of a total money supply (M1) of $1,081.3 ...