But the most recent RRR increases serve mainly to sterilize the passive money supply caused by the increase in foreign exchange reserves.

So, instead of becoming the principal reserve asset of the global system, the proportion of SDRs in global reserves shrank to a tiny fraction, rendering the SDR the monetary equivalent of Esperanto.

The RRR is only one example of a textbook sterilization instrument.

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The US economy has not responded to the Fed s monetary expansion, because America s biggest problems are not liquidity problems.

But the world soon became awash in dollars. So, instead of becoming the principal reserve asset of the global system, the proportion of SDRs in global reserves shrank to a tiny fraction, rendering the SDR the monetary equivalent of Esperanto.

The Fed s monetary easing did temporarily contribute to a weaker dollar, which boosted net exports.

A majority of the Fed s governors believes that aggressive monetary expansion has reached, if not exceeded, the bounds of prudence.

Otherwise, Treasury bond yields would be far higher, thwarting monetary expansion by the Fed.

The two 50 basis point RRR increases just locked up the same amount of liquidity.

Egypt is running low on cash before recent rescue loans, currency reserves covered less than three months of imports and Egyptians are hoarding fuel and foodstuffs in anticipation of future shortages.

Unless the Fed successfully implements an exit strategy from monetary expansion, which is doubtful, China will not be able to recover its losses.

More monetary and credit easing is also required for the US Federal Reserve, the Bank of Japan, the Bank of England, and the Swiss National Bank.

While speculators and bankers profit from the decline in interest rates that accompanies the Fed s asset purchases, the intended monetary and credit stimulus is absent.

That is both logical and rational and thus not something that the US Federal Reserve can offset with unconventional monetary easing.

And then the government needs to focus more attention on structural adjustment the only effective cure for China s 3.2 trillion headache.

The monetary easing undertaken by the US Federal Reserve raised expectations for a devaluation of the US dollar that might help US exports.

Monetary Mystification

As a result of this chronically rapid growth in broad money, China s M2 GDP ratio has surpassed 180 , the highest in the world.

The establishment of SDRs was accompanied by a commitment, included in the IMF Articles of Agreement, to making the special drawing right the principal reserve asset in the international monetary system (Article VIII, Section 7 and Article XXII).

Money used by commercial banks to satisfy the RRR, which is held in accounts at the PBC, can no longer be extended as loans.

The Changing of the Monetary Guard

CAMBRIDGE The United States Federal Reserve s policy of quantitative easing is reducing the value of the dollar relative to other currencies that have floating exchange rates.

For example, we know that we should lower interest rates and inject liquidity to fight stagnation, and that we should raise policy rates and banks cash reserve ratios to stifle inflation.

After all, while the previous rounds of US monetary easing have been associated with a persistent increase in equity prices, the size and duration of QE3 are more substantial. But, despite the Fed s impressive commitment to aggressive monetary easing, its effects on the real economy and on US equities could well be smaller and more fleeting than those of previous QE rounds.

प रत स पर ध त मक म द र क सहजत क र कन

Europe s Monetary Cordon Sanitaire

The Making of International Monetary Reform

4120 Cash margin requirement

Nobel prize winning economist Paul Krugman, who berates the Fed for not opening the monetary sluice far wider, showed the follies of the crude Keynesian approach nearly a decade ago.

BEIJING Not long after the United States Federal Reserve Board announced its second round of quantitative easing (known as QE2), the People s Bank of China (PBC), China s central bank, announced two increases of 0.5 percentage points in the required reserve ratio (RRR) of bank deposits.

But inflation which rapid money supply expansion inevitably fuels has so far remained subdued, at roughly 2 , because banks are not using their swelling reserves to expand credit and increase liquidity.

Moreover, both have a reputation for believing that the Fed should not place excessive weight on price stability relative to unemployment.

Stability and Prosperity in Monetary Union

China s Monetary Sterilization

The Use and Abuse of Monetary History

Historically, there is a lag of 8 12 months between M1 monetary growth and inflation.

For how long will this sterilization continue, and how far will it go? At what point will higher RRR levels cause Chinese commercial banks to begin running losses?

This is a small sum relative to Russia s currency reserves, but plenty for the underdeveloped banking system, which experienced a severe credit squeeze.

Backups

Europe s monetary union has worked remarkably well.

SR VI. Alternative remittance

Up to the late 1990 s and the advent of monetary union, most European Union sovereign debt was domestically held in 1998, the overall ratio of foreign held debt was only one fifth.

Bernanke also noted the possibility of temporarily raising the Fed s medium term inflation target (a policy that I suggested in this column in December 2008).

The 1850s was a decade of wrangling over whether to adopt a sterling monetary system or a decimal monetary system based on the US dollar.