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Abstract: The monetary base includes currency in circulation, while the circulation of the currency is something familiar to the public, and we deal with it every day. It is also the root of the economic life of most of the problems. How much currency in circulation and inflation is closely related to the occurrence and impact on economic development and employment status. But the existing monopoly of base money issued by the central bank and the national authority forced circulation, the public has become accustomed to it, but also more concerned about their purchasing power, and gradually despite its redeemable nature. This paper analyzes the current base currency is actually the basis of the central bank's monetary liability on the holder, and further discussion of the relationship between the monetary base and many central banks.

Keywords: central bank; base money; commercial banks

Monetary base is the central bank liabilities to the public and commercial banks

Base currency, also known as high-powered money, strong currency, in Western economics, it usually refers to the creation of commercial banks deposits in the central bank's monetary reserve (statutory reserves and excess reserves) and circulation outside the banking system The sum of these two currency.[1]

In order to understand how the monetary base to become the central bank's liabilities, we need to review the history of money. Thomas Meyer believes that any one can perform exchange interMediary, values or items with full flow of wealth storage means functions are likely to be money (generalized). Menger that the use of any specific item as money (narrowly), is a social habit, and this habit is through some kind of historical process evolved. So why is everyone willing to pay something useful to exchange the currency exchange is now merely an intermediary it?

Monetary base is the central bank can not honor the debt

Central bank seigniorage for the government to get a monopoly on the monetary base by casting

Base currency is the main source of central bank assets form

By controlling the central bank to regulate the amount of base money economy

Reference

1) Ivatury, G. and Timothy Lyman. Use of Agents in Branchless Banking for the Poor: Rewards, Risks, and Regulation. CGAP Focus Note No. 38. Washington D.C.: October 2006

2) Kumar, Anjali et al. Expanding Bank Outreach through Retail Partnerships: Correspondent Banking in Brazil World Bank Working Paper No. 85. The World Bank: Washington DC. 2006

3) Prieto Ariza, Ana Maria. Ampliación del Acceso a los Servicios Financieros Mediante Corresponsales No Bancarios: La Experiencia de Brasil y Perú. Documento Asobancaria No. 3. Asociación Bancaria Y de Entidades Financieras de Colombia: Bogota. 2006

4) Jacob, Katy. Retailers as Financial Services Providers: The Potential and Pitfalls of This Burgeoning Distribution Channel. The Center for Financial Innovation: Chicago, IL. 2005.