Question

When did Radford observe "money" Growth and destruction? Were the impact to the monetary system and the economy the same as when our federal reserve conducts open market operations?

Answer 1

Radford explain about the growth of money which leads to a destruction in the economy. He shows the cigarette consumption of American, there is free distribution of cigarettes to the soldiers. This helps the tobacco company, but on the other hand, it affects the health of the soldiers. This leads to the increasing demand for cigarette currency. It paved way for the tax drive demand for modern state issued currency. This makes an addiction on cigarettes by the soldiers. Though most of the people prefer the state issued currency to pay the tax for the cigarettes. This make the concept, money creation affect the economic stability and leads to its destruction.
Open Market Operations (OPO) is the central bank sell or buy the US securities to influence the quantity of bank reserves and the interest rates. Open market operations reduce the quantity of money and loans in the economy. The concept of money multiplier is used under this condition to finding the level of money created in the economy through loan expansion process. Multiplier is calculated as 1/ RRR, where RRR is the Required Reserve Ratio. If the Fed conducts OPO to increase money supply through purchasing the bonds, the payment of money is outside from the banking system. This money will increase the money supply in the market. There is another person deposited cash in the bank.