Adopting an F&S-style approach, what can we say about the relationship between quantities of money and inflation? What can the most recent events teach us?
Having said this, however, banks’ available capital is limited, as mentioned earlier, and this can be a constraint on their ability to not only originate credit but also bear credit risks on their own balance sheets. Banks must therefore use their capital efficiently by extending credit only when it matches their strategies and reallocating the remaining credit risk to other investors.