More Credit, More Money: Poland and the Euro-zone


Money matters — it’s a maxim of Prof. Milton Friedman that I repeat often in my columns, and to my students in class. Since the Northern Rock bank run of 2007 — the “opening shot” of the recent financial crisis — the money supply, broadly measured, in Poland and the rest of Europe has taken a beating. In the Euro-zone, money supply growth is anemic and becoming weaker, while private credit continues to contract. In Poland, the money supply has seen a recent slight recovery, but remains relatively weak. This is cause for concern, because the quantity of money and nominal gross domestic product are closely related.

When it comes to measuring the money supply, we must heed the words of Sir John Hicks, a Nobelist and high priest of economic theory: there is nothing more important than a balance sheet. These sentiments were recently echoed by my Parisian friend, former Governor of the Banque de France Jacques de Larosière, in his April 17th lecture at Sciences Po…

More Credit, More Money: Poland and the Euro-zone

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