“Consistent with Fisher’s formula, but not much considered, was a terrible possibility. It was that the supply of money could not be increased. The largest part of the supply of money, as by now will be adequately understood, is deposits in banks. These come into existence as people and firms borrow money. If business is sufficiently bad, profit prospects sufficiently dim, gloom sufficiently deep, businessmen may not borrow money. Then no deposits are created, no money comes into existence. The banks can be provided with cash for reserves by purchases of government securities by the Federal Reserve Banks from the banks or their customers. This cash will then lie fallow in the banks. Without borrowing and deposit creation there is no effect on prices or through prices on production. This, it now developed, was not a hypothetical possibility but one that was intensely, miserably real.” (209)
“Money had dealt impartially with both those who feared inflation and those who wanted some — or, more precisely, wished to recoup past price reductions. All had been shown to be wrong. A country seeking inflation was like a woman of exceptional virtue deciding, after many adverse warnings of conscience and friends, to take a lover, only to discover that the lover was both unwilling and unable.” (212-213)
Money: Whence It Came, Where It Went. Boston: Houghton Mifflin Co. 1975.