Thus, use of expansionary open market operations typically generates more debt in the private sector of society (in the form of additional bank deposits). The private banking system charges interest to borrowers as a cost to borrow the money.. The interest costs are borne by those that have borrowed, and without this borrowing, open market operations would be unsuccessful in maintaining the broad money supply, though alternative implementations of monetary policy could be used. Depositors of funds in the banking system are paid interest on their savings (or provided other services, such as checking account privileges or physical security for their "cash"), as compensation for "lending" their funds to the bank.
Thus, use of expansionary open market operations typically generates more debt in the private sector of society (in the form of additional bank deposits). The private banking system charges interest to borrowers as a cost to borrow the money.. The interest costs are borne by those that have borrowed and without this borrowing, open mar,ket operations would be unsuccessful in maintaining the broad money supply, though alternative implementations of monetary policy could be used. Depositors of funds in the banking system are paid interest on their savings (or provided other services, such as checking account privileges or physical security for their "cash"), as compensation for "lending" their funds to the bank.