Money
Q
What is money? Are bank deposits money?
A
Money is the 'ultimate thing' used for settlement: electronic or physical cash. Bank deposits are not money, but a balance which the bank redeems in money. Government debt, even if counted as reserves, is not money, but are converted to base money (monetized) by the Fed according to a pre-arranged price (the fed funds rate).
Q
Why is credit confused with money?
A
Credit provides access to money for an additional cost. Credit substitutes for money in average or good times.
Q
What is an excess of money?
A
An increase in credit (backed by the promise or actuality of new base money by the Fed) without an immediate increase in consumption goods (either by savings or new technology). Profits rise temporarily until prices begin to adjust, then the spread between expenses and selling prices cannot be maintained and real profits fall. Over time, this creates a shortage of goods which leads to inflation and the necessity of Fed tightening.