"If a nation's currency is to put in double duty as a global reserve currency, the issuing nation must print drowning amounts – far beyond its national needs."
"The thing people have the most trouble with is the idea that central banks are not central. It flies in the face of everything you have been taught and told your whole life. There is no money in monetary policy; it is entirely psychology..."Monetary policy contains no money; it runs entirely on expectations. Therefore, according to this view, what ultimately matters is how you perceive monetary policy..."Then you might act in anticipating all that 'money printing' was going to have stimulative and even sharp inflationary effects. You might then pull forward purchasing activity, or, if a business, hiring and production, before the expected higher costs arrived."
"The Dollar did not replace gold in 1971. The [shadow banking system] did long before 1971...The global money system moved on without central banks bothering to notice.""Especially from the 1960s forward, and particularly in the 1990s forward, was that the [shadow banking system] replaced other forms of mediation in global trade. What actually happened was it became a parallel banking system unto itself...with no backing by gold or by physical cash issued by the US Treasury..."That balance clearly shifted and changed throughout the '80s. When the UK Pound crisis hit in 1992, central bankers were astounded by the massive offshore liquidity that easily dwarfed what they could answer with. The balance of money had shifted, dramatically, yet economists and policymakers did not shift with it..."
"So what we're describing here is almost an entire massive complete system...that existed offshore and wholesale, in the shadows, because there was no regulatory authority...no government authority over the conduct of this system. It was essentially a self-contained system that operated beyond the reach of everybody."
"The world needs Dollars for the purposes of a global reserve currency. It gets them from this [shadow banking] system..."You want to swap Yen for US Treasuries? Credit-based 'Dollars'. You want to swap Yen for Singapore bonds? Credit-based 'Dollars'. A company in Brazil wants to ship China raw material? Credit-based 'Dollars'. A firm in Europe is trying to build capacity in Thailand? Credit-based 'Dollars'..."The [shadow bank's] Dollar is the world's true reserve currency; therefore, problems in it are going to be problems shared by the whole interconnected global economy..."
"Unless and until the banking system moves away from Dollars, diversifying national reserve holdings means absolutely nothing. Nothing...despite a decade's worth of noise, fury and quite often heartache, there is simply no realistic alternative...We are stuck with this arrangement largely because the media, politicians, central bankers etc, don't know a thing about it."