The Crest of a Wave

A wholesale bank’s liabilities are repo borrowings, not deposits. This places US Treasury notes and bonds at the very centre of the modern monetary system. Lately, bank regulators have been attempting to further reduce and even remove Treasuries from capital ratio requirements. This should allow banks to significantly expand wholesale bank lending

This is the so-called deposit multiplier model much-loved by textbooks, but it is incorrect in practice because loans create deposits and not vice versa

Nowhere did he question the position of the dollar, and by default US policy makers appears to accept that it could decline further. Given that many rival economies set their monetary policies to maintain parity with the US dollar, Fed easing and a weaker US exchange rate will likely spur easing across international markets.

This framework gives important insights in a debt-driven World. First-and-foremost, financial markets increasingly operate as vast debt refinancing mechanisms not new capital-raising vehicles . Second, domestic and international capital flows represent key drivers of the economic system. Increasingly cross-border flows determine trade balances, not