Why doesn't anyone help me, I always share my knowledge where I know it's strong to help others. But when-ever I have GAPS in my knowledge, no-one comes to the rescue.
I know the basics of economy is production vs consumption and the main actors involved primarily being business, consumers, and govt thru it's regulations/taxes and other instruments. The ideal situation in an economy is to set production so it doesn't exceed or undersupply demand. Why? u don't want excess of goods cause u will need to export it and sell it at a lower pricee becuz your 'desperate'. U also obviously don't want to under-supply and lose out on consumption. So the ideal situation is production-consumption being in perfect union. Lots of instruments are used by economist, which I won't go into detail.
But what I want to know is Central Banks. This is where money is supplied to private banks to support the market by providing the needed capital such as business loans-mortgages-vehicle purchases-investment capital. I get that part and I know they use instruments and a range of them to ensure this isn't oversupplied or undersupplied also but matches market demand.
What I want to know is the 'interest rate' component that central bank set before supplying private bank. Do banks pay that interest rate back to central bank? for example the bank loans a million and at 5% interest rate. Do they pay back 1 million plus 5% to the central bank? Or are they setting the minimal interest rate for private banks saying u can't go below 5%. Becuz if the central bank is collecting interest from banks, it would be very wealthy, since it's getting a portion from the whole market. But my mind can't come to think why they would need it anyways, since they own the printing of currency and the problem is, if it starts to act like a business, it may become corrupted to business interest where-as when it's neutral with nothing to gain, it can be great stabilizer for the 'market'.
I know the basics of economy is production vs consumption and the main actors involved primarily being business, consumers, and govt thru it's regulations/taxes and other instruments. The ideal situation in an economy is to set production so it doesn't exceed or undersupply demand. Why? u don't want excess of goods cause u will need to export it and sell it at a lower pricee becuz your 'desperate'. U also obviously don't want to under-supply and lose out on consumption. So the ideal situation is production-consumption being in perfect union. Lots of instruments are used by economist, which I won't go into detail.
But what I want to know is Central Banks. This is where money is supplied to private banks to support the market by providing the needed capital such as business loans-mortgages-vehicle purchases-investment capital. I get that part and I know they use instruments and a range of them to ensure this isn't oversupplied or undersupplied also but matches market demand.
What I want to know is the 'interest rate' component that central bank set before supplying private bank. Do banks pay that interest rate back to central bank? for example the bank loans a million and at 5% interest rate. Do they pay back 1 million plus 5% to the central bank? Or are they setting the minimal interest rate for private banks saying u can't go below 5%. Becuz if the central bank is collecting interest from banks, it would be very wealthy, since it's getting a portion from the whole market. But my mind can't come to think why they would need it anyways, since they own the printing of currency and the problem is, if it starts to act like a business, it may become corrupted to business interest where-as when it's neutral with nothing to gain, it can be great stabilizer for the 'market'.
