Wednesday, July 04, 2012

US Financial System has now been reset

For the first time in 40-plus years, the ratio of monetary base to credit in America has returned to 5%.
(If you want to check the data, see here and here.)

4 comments:

James Higham said...

Explain to a layman.

Sackerson said...

The way I see it, we'e looking at fractional reserve lending for the country as a whole. True, much of the new money is not in the real economy, but overall it looks as though the powers that be have shoved enough in to get back to a more conventional ratio.

Having said that, money+debt in relation to GDP or any other measure of economic activity is now hugely out of balance.

James Higham said...

the powers that be have shoved enough in to get back to a more conventional ratio

For how long? Cf Jesse.

Sackerson said...

James: quite.