As I understand it, Gardiner is saying that the Banks are unable to create credit because of a shortage of "high-powered" money.
High Powered Money "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The idea that the system is short of Federal Reserve Notes sounds like a way of being confused on whether its a liquidity crisis or a solvency crisis. Answer, its a solvency crisis that has been papered over by treating it as a liquidity crisis.
Now, a solvency crisis that stretches out to include depository institutions whose accounts function as credit-money becomes a liquidity crisis because 90%+ of liquidity is credit-money rather than fiat-currency ... but all the bridging loans in the world will not magically make an insolvent financial institution solvent in the face of a recession and a bear market. In those conditions and for a firm that is not solvent, its a bridge to nowhere. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
