The (other) deleveraging: What economists need to know about the modern money creation process

Manmohan Singh, Peter Stella 02 July 2012

a

A

One of the financial system’s chief roles is to provide credit for worthy investments. Some very deep changes are happening to this system – changes that surprisingly few people are aware of. This column presents a quick sketch of the modern credit creation and then discusses the deep changes are that are affecting it – what we call the ‘other deleveraging’.

a

A

Topics:  Macroeconomic policy

Tags:  monetary policy, Central Banks, money multiplier, Pledged collateral, re-pledging, private money creation

Central Bank reserve creation in the era of negative money multipliers

Manmohan Singh, Peter Stella 07 May 2012

a

A

The phenomenal increase in bank reserves that has resulted from central bank responses to the current financial crisis has led to considerable anxiety regarding a potentially explosive and uncontrollable future increase in inflation. Virtually identical concerns within the Federal Reserve in late 1935 motivated large increases in reserve requirements during 1936 and 1937; actions widely regarded as contributing to the sharp 1937-8 recession (see Friedman and Schwartz 1963).

a

A

Topics:  Macroeconomic policy

Tags:  monetary policy, Central Banks, reserves, money multiplier