Before revision:  However the inter-relationship between money and loans within the commercial banking system, also suggests that deeper systemic issues can accompany any form of unlimited commercial bank lending . This paper examines the question of why speculative demand for credit during credit bubbles is not naturally constrained by regulated limits within the banking system on the supply of loans. In particular, we propose an explanation for the current credit crisis, as a fundamental, systemic failure in the system of rules governing the behaviour of the reserve based banking system, which have resulted in the effective removal of central bank control over money and loan supply expansion.
After revision:  However the inter-relationship between money and loans within the commercial banking system, also suggests that deeper systemic issues can accompany any form of unlimited commercial bank lending , and these appear to have been overlooked by this analysis. In this paper we propose a general explanation for credit crises based on an examination of the mechanics of the banking system, which have resulted in the effective removal of central bank control over money and loan supply expansion.