Monetary expansion does not only take place from the central government level. It also takes place on the private level. This is because the central government possesses the government power to issue new money while the private market only possesses the power to issue new loans based on its reserve base of government money.
The free market, through private financial institutions can give out loans to private citizens to make purchases using the currency base it holds that was loaned to it by the Central Government. Central Government loans financial institutions 1 RMB at an interest rate of 2.5 percent. And the private financial institutions loan to private citizens 10 RMB at an interest rate of 5 percent. Depending on what the government set rules happen to be, private banking can loan 10 RMB for every 1 RMB it holds. It could loan 100 RMB for every 1 RMB it holds. But most Central Governments set standards as to how far they are allowed to leverage.
That leveraging helps increase the money supply since without those loans, new spending could not have been made to help drive up consumer prices. As a result of this, the national currency loses its value even if the Central Government is not printing new money. The national currency loses its value simply because the free market is giving out new loans.
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