Money loses stability if it's easily faked. The major difference between the two types of checking accounts is the type of financial institution in which they are held. For our purposes, we will combine them. These, along with time deposits and money market accounts, are typically referred to as near money . They can be easily converted to money but aren't technically immediately spendable.
Banks actually create money through demand deposits .
Banks are required to hold a set percentage in reserve but can loan the rest out. This process goes on and on. Through its 12 regional branches, the Fed is also the chief economic policy maker. The Fed uses discount rates, reserve requirements, and treasury bills to control the amount of money in circulation at any given time. In a period of inflation , there is too much money in circulation.