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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.)

5 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.

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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.