Word: eurodollarsâ
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Tight money might have reduced inflation faster if big banks had not discovered ingenious methods of avoiding the Federal Reserve's pincers. To help meet corporations' vast appetites for loans in the face of the credit shortage, U.S. banks borrowed $13.3 billion in Eurodollars???U.S. dollars in private hands abroad?and brought them home. The board finally closed that loophole by imposing a 10% reserve requirement on borrowed Eurodollars. Thereafter, the banks circumvented restraint by issuing vast quantities of commercial paper ?unsecured promissory notes. Belatedly, the Reserve Board plugged that loophole by placing an interest-rate ceiling on commercial...
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