Dilution-based monetary transmission November 2, 2012 at 8:17 am
From the Economist:
In Britain, the monetary base is 334% higher than it was six years ago, reserves at the central bank are 909% higher but broad money is only up 47% and bank lending to the private sector has risen just 31%, In other words, the money multiplier has collapsed.
So how can central banks encourage commercial bank lending?
Charles Goodhart has an interesting suggestion: any bank which failed to increase lending by a certain percentage would be forced to issue equity to the government, a kind of backdoor nationalisation. Nice.