ABSTRACT
The monetary base is the primary stock of money in the economy. The monetary base derives from the view that in all economies there is some ultimate means of settling debts between individuals and between financial intermediaries such as banks. Whatever it is that performs this function can be defined as base money and the aggregate is the monetary base. Monetary base theory has developed in the twentieth century. The commercial banking system was originally seen as a pure intermediary between net surplus and net deficit groups in the economy and that was then supplemented, and later almost completely displaced, by the view of it as a dynamo of credit creation. In March 1981 the Bank of England Quarterly Bulletin carried an article entitled 'The Monetary Base - A Statistical Note'. This stated that: Although 'monetary base' is a term in common use in discussions on monetary control, there is in fact no universally accepted definition of it.
