By Doug French
Speaking at the Grant's spring conference, Steve Hanke, master monetary economist, described the money creating business in the US as "Pretty much everything is well-behaved." While the Fed does its best (or worst) to inflate, Hanke is one of the few in academics to understand that the real money-creating machines are commercial banks. Loan dollars become deposit dollars. Lots of lending means the money aggregates increase. Little lending means the opposite.
Banks bitten in 2008 are, along with their regulators, twice shy to make the marginal loan. The short summary of Hanke's