Did a Crash in Money Growth Cause the Global Slump?
Edited by Tim Congdon
Chapter 7: The Basel rules and the banking system: an American perspective
The evidence for a medium-term relationship in the USA between changes in nominal GDP and changes in the quantity of money is compelling. But policy-makers responded to the Great Recession by pressure for higher bank capital/asset ratios. This pressure reduced the rate of money growth at just the wrong time and intensified the weakness of spending. The intellectual origins of the recapitalization demands came partly from the UK, where the Northern Rock crisis of September 2007 was seen as validating the case for more bank capital.
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