posted on Oct, 12 2008 @ 04:44 PM
reply to post by Manawydan
When people keep their money in banks, the physical currency doesn't need to be in circulation. It's on a computer screen in the bank. When people
pull their money to keep at home, that paper currency has to come from somewhere.
Inflation/devaluation doesn't rely on physical currency. Most of our "money" is virtual, just numbers on a screen. For example, the $700B bailout
won't result in $700B of physical currency being printed, it just involves wiring "money" from one computer to another.
People demanding their physical currency, though - that puts more currency in circulation, especially such a large amount in a very short time.