Not exact matches
Canadians should not give up their
monetary policy to buy and
hold US
dollars.
With banks
holding fractional reserves of Federal Reserve
dollars (notes and deposit claims on the books of the Fed, whose sum is called «the
monetary base»), when the Fed increases the quantity of Federal Reserve
dollars by $ 1 billion, the banking system ordinarily creates a multiple amount of deposit
dollars.
Think of it this way, if you had a
dollar and there were only ten
dollars in circulation, you'd be
holding 10 % of the world's
monetary supply.
The brutal fact was that the US was
dollar - rich,
holding all the cards, and at Bretton Woods forced through agreements that effectively ended British
monetary dominance and broke the trade tariffs and advantages of the Empire.
Liquidity preference is simply the amount of
monetary base that people are willing to
hold, per
dollar of nominal GDP.
As I noted this past January in Sixteen Cents: Pushing the Unstable Limits of
Monetary Policy, a collapse in short - term yields to nearly zero is a predictable outcome of QE2, based on the very robust historical relationship between short - term interest rates and the amount of cash and bank reserves (
monetary base) that people are willing to
hold per
dollar of nominal GDP:
Earlier in the Day: Economic data released through the Asian session this morning was limited to China's April service sector PMI figures, with the RBA also releasing its
monetary policy meeting minutes from Tuesday interest rate decision.For the Aussie
Dollar, while the RBA's
hold had been widely anticipated, the tone of
Make no mistake — every share of stock, every bond certificate, every
dollar of
monetary base that has been created is being
held by someone, and will continue to be
held by someone until each of those securities is retired.
The answer could be that while central bank interventions increased the
monetary base, or M0 money supply, those
dollars were
held in reserve by the banking system.