Going to be honest. I understand a bit about these two things, about as much as a normal person could, given what is available to read on the web. The discussion on this is pretty big. Normal people like you and me, and not just the economists, are talking about inflation. Generally, people believe that we are in an inflation period, but some people are also saying that there will be deflation…after a market collapse! It sounds a bit scary because I’m familiar with inflation, but I have no clue what deflation can do to a society.
Central banks control the value of currency by selling and buying bonds. For example:
The central bank sells treasury bonds to Microsoft. Cash goes to the central bank to be stored or destroyed. This takes the money out of circulation and therefore decreases the “money supply.” Deflation.
Microsoft sells treasury bonds back to…
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