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Narrow Money Supply

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Bank of England, yes, I understand that.. but what I don't quite get is how it fits in in the context of money supply.

I will explain what I think happens and perhaps someone could put me straight?

Banks run a fractional reserve, meaning that there is never as much money on deposit as is lent out. The expansion of money supply due to this effect is broad money or M4. (Simple explaination here: http://money.howstuffworks.com/bank1.htm )

For this to be possible there has to be an actual amount of tangible money or narrow money (M1).. this is the value of all money that is not borrowed such as the cash in your hand or the fraction of the money in your savings account that has not been lent out by the bank to other people.

When the bank of England wants to increase the supply of narrow money they can print it as notes or create it as a positive balance in an account.. but who do they give the notes to or who's balance do they credit?

Any suggestions welcome.


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