Currently, mining producers must sell to an intermediary and hit their “Bid”, which decreases their revenues materially. As the vast majority of producers sell at spot this is a compelling proposition for them. Central bank reserves are used by commercial banks in order to make payments between each other.
The CBI has monopoly on creating reserves and sets the reserve ratio. According to the money multiplier model, the CBI is able to limit how much money is created by commercial banks, by limiting the quantity of reserves and setting the reserve ratio.
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