That is the value of money. I understand how to destroy that, but how do you remove money from the system once it is in circulation?
In our case, the Federal Reserve would sell Treasury Bonds to its member banks for cash. That cash received would then be extinguished from the Fed's balance sheet.
Easy come, easy go.
Another way is for the Fed to increase the interest rate it charges member banks for loans. The banks borrow money from the Fed and use it as the basis to lend even more at a profit. By increasing the interest rate on those loans, the Fed effectively reduces loan activity. And since even the act of lending is money-creation, the money supply is reduced.
The Fed can also increase required reserves. That also reduces a bank's ability to lend.
Of course, none of these has been tried in ages. We're stuck in money-creation mode.
That is the value of money. I understand how to destroy that, but how do you remove money from the system once it is in circulation?
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Declare the old stuff invalid and replace it with new paper pictures with smaller numbers.. do a reverse split..