Yes, but obviously - think how much money the average person makes, and how much goes out of pocket as cash vs. electronic bits. (Especially if you’re the latest generation addicted to their bank card).
This - Money supply - Wikipedia - an elementary explantion of the different types of “money supply”, very little of which is cash.
When ATM’s first became popular, it occured to me they would create a spike in demand for what they dipense, i.e. for $20 bills.
Just want to clarify this: The Central Bank doesn’t normally lend out money in most countries. What it does do is set the reserve rate which says how much money can be lent out by the member banks. Small changes can have a big say in the money supply.
It also sets the inter-loan rate between the local feds and the member banks. The higher this rate, the more most banks have to charge for their loans. The more they charge, the fewer loans and the cooler the economy. Cooler economies grow slower, thus slowing down growth in the rate in the money supply.
You’re right that countries like Zimbabwe depend heavily on paper than a country like the U.S., but it also takes distributing that currency. Paying public payroll workers a good percentage of the GNP and forcing banks to lend to the government will greatly increase the money supply. But, you can also affect inflation by simply making fewer goods available. Zimbabwe’s policies did just that.
The takeover of the farms caused a great drop in the value of farmland which made it impossible to raise the money necessary to plant new crops. Fewer crops meant that food cost more. Anti-inflation measures such as prohibiting stores to raise prices brought even fewer goods to the market. Zimbabwe’s trade dropped to zero since no one wanted to hold Zimbabwe currency. That meant even fewer goods and more money chasing them.
So, Zimbabwe did both tricks: Increased the money supply while decreasing what that money supply could buy.
Modern money is all fiat currency. It’s only worth what you think its worth. If you find few things you can use the money for, it becomes less valuable and takes more to buy the same goods.
What I find interesting is that there have been several countries in recent history where the government outright collapsed, but the money that the government backed is still holding its value.
In theory, these bills should be worthless since there isn’t even a government backing the currency anymore, but people need cash to purchase things, and the collasped currency is all they have. Local producers take the bills because they know they can use them to buy raw materials. Consumers take the bills because they know that stores still accept them. Employees don’t mind getting paid in these bills because they know they’re useful.
I’m going more by what I hear of the Canadian central ban - they all tend to operate about the same. The central bank is lender of last resort (i.e. to help reconcile the IOU’s between banks, whn one is caught short and the others don’t like holding its paper). The overnight interest rate they set on that loan is the basis for the Prime lending rate, etc.
If there was a way to do things wrong, Zimbabwe did it. One side effect of runaway inflation - people who make things hold back, because they won’t be sure of making a profit. People hoard things, because they aren’t sure they will be able to get them later. Plus…
A geologist that gave a talk where I worked several years ago spoke of the situation in Russia during the hyperinflation. People were paid every day, then rushed out to buy anything they could find right away at lunchtime, converting questionable paper into hard goods. In the eveneing tehy would stand at the subway exits in the suburbs, holding up what they had bought looking to trade.
Paper money is always a confidence game. Your example of the acceptance of unbacked paper - that works until people stop accepting it - starting with the banks. You think this discussion in mind-bending… Now consider the business of independent banks in a multi-currency environement! An upper-Slobivian turdnar is only worth what others will accept for it. Ultimately, it means buying stuff from people in Upper Slobivia, (goods or other countries’ currency). The acceptance in the rest of the world depends on how reasonable other people think it will be to redeem those turdnars for usable goods or other currency.