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To: Ilaine who wrote (92)3/28/2001 5:14:49 PM
From: JF Quinnelly  Read Replies (1) of 443
 
Credit is always larger than the monetary base. It's also what will contract on the downside of the business cycle.

Dollar based credit now sloshes all over the world in digital and electronic form, but such credit accounts have always been bookkeeping entries on a bank's books. They're just savings accounts and checking accounts. Ultimately Euro-dollars, or Petro-dollars, or whatever you want to call them, are still entries in the books of U.S. banks. They don't exist independently of the Federal Reserve System. It's a mistake to think that dollar balances held by foreign holders exist outside of the American banking system. They don't.

I'd counter that the gold standard system a hundred years ago was far more independent of governments than the current monetary regime. Not that it is the best system, just that it was less accountable to governments than what is used now.
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