in the supply of the other components of money, that is, so - called inside money, which has been supplied exclusively by the private sector. until just recently, inside money consisted exclusively of bank deposits which were supplied competitively by banks. however, governments have nevertheless restricted the supply of means of payment and stores of value by the private sector in the past. but this has been very substantially liberalised over the last 20 years or so. the result is that the availability of efficient means of payment that can also serve as good stores of value ( and thus as a hedge against inflation ) has improved almost beyond recognition compared with what was available during the period of financial repression. although governments have retained a monopoly on the production of high - powered money, they have always permitted and indeed increasingly encouraged competition in the production of inside money. the upshot of this is that outside money now comprises only a rather small fraction of total money balances ( taking, say, a broad definition of the money stock ). after undergoing a dramatic decline, particularly in the period following the second world war, it now ranges from about 1 % in the united states and about 5 % in the united kingdom to about 6 % in germany. 16 governments have retained a monopoly over the production of high - powered money. there are very good reasons for this. notes and coin issued by the central bank and, in some cases, by the government are unique in the following sense : they are the only instrument that can mediate a transaction and settle it with finality at one and the same time, which it does by virtue of its legal tender status. currency is also unique in that it supplies the unit of account for the whole economy. although privately supplied inside money and publicly supplied outside money compete with one another as transaction media and stores of value, there is nevertheless a kind of symbiotic relationship between the two. this is, first, because inside money ( predominantly bank deposits ) may owe its acceptability to the fact that its issuers promise, and indeed are legally bound, to redeem it [ either immediately ( sight deposits ), upon maturity ( time deposits ) or after a period of notice ( savings deposits ) ] in outside money and, second, because outside money provides the unit of account for the whole system without which inside money might be less acceptable in the absence of a single ( commodity ) numeraire. seen in this light, it appears that hayek was correct in arguing that efficiency and ( price )

the size of the total system declined slightly in 2008 but increased subsequently to reach usd 67 trillion in 2011 ( equivalent to 111 per cent of the aggregated gdp of all jurisdictions ). the global estimate for the size of the shadow banking system has increased by some usd 5 to 6 trillion since last year. • the shadow banking system ’ s share of total financial intermediation ( which includes banks, insurance and pension funds, public financial institutions and central banks ) has decreased since the onset of the crisis and has remained at around 25 per cent in 2009 – 2011, after having peaked at 27 per cent in 2007. in broad terms, the bis central bankers ’ speeches aggregate size of the shadow banking system is around half the size of banking system assets. • there is also a considerable diversity in the relative size, composition and growth of the non bank financial intermediaries across jurisdictions. for example, the size of the shadow banking system in us and a number of other jurisdictions continues to be large relative to the regular banking system. the us has the largest shadow banking system, with assets of usd 23 trillion in 2011, followed by the euro area ( usd 22 trillion ) and the uk ( usd 9 trillion ). • there is also considerable divergence among jurisdictions in terms of : ( i ) the share of non - bank financial intermediaries ( nbfis ) in the overall financial system ; ( ii ) relative size of the shadow banking system to gdp ; ( iii ) the activities undertaken by the nbfis ; and ( iv ) recent growth trends. • even during the period immediately following the global financial crisis ( 2008 – 11 ), the shadow banking system continued to grow, although at a slower pace, in seventeen jurisdictions ( half of them being emerging market and developing economies undergoing financial deepening ) and contracted in the remaining eight jurisdictions. • among the jurisdictions where data is available, interconnectedness risk tends to be higher for shadow banking entities than for banks. shadow banking entities seem to be more dependent on bank funding and are more heavily invested in bank assets, than vice versa. shadow banking in india notwithstanding the data constraints in actual evaluation of its size, the shadow banking sector in india is still small in size compared to its counterparts in advanced economies. in 2011, assets of other financial institutions ( ofis ) in india were usd 375 billion vis - a - vis bank assets of usd 1518 billion and gdp of usd 1766 billion. the assets of the shadow banking system accounted for 21 percent of