Did a Crash in Money Growth Cause the Global Slump?
Edited by Tim Congdon
Chapter 5: The impact of the New Regulatory Wisdom on banking, credit and money: good or bad?
Official reaction to the Great Recession included a sharp tightening of bank regulation, particularly of banks’ capital requirements. The chapter describes the changed arrangements as ‘the New Regulatory Wisdom’. It argues that the NRW has caused banks to limit credit and the services they provide to customers. Even if justified on microeconomic grounds (because banks are safer), the reduction in bank credit and the quantity of money had adverse macroeconomic results in the Great Recession.
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