A nation state’s right to create and control its own money is a core aspect of its sovereignty. It is a basic principle of American law that the Congress has the ultimate power to govern money. The United States Constitution (Article I, Section 9, Clause 7) states: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law. The US Treasury can only pay on behalf of the Government when Congress authorizes it to do so. Similarly, the US Congress passed the Federal Reserve Act (FRA) to establish the Federal Reserve System (the Fed) as the central bank of the United States. The law mandates the Fed to control and regulate the supply of the US Dollar.
We demonstrate in the book theoretically and empirically that it is not the Fed that actually controls the supply of the US Dollar. That "exorbitant privilege" of control and supply of the world's global currency--the US Dollar--rests with 4,049 commercial banks, 565 savings institutions, and 4,645 credit unions. So, more than 9,000 depository institutions “print” the US dollar as you will discover in this book.
K Vaidya Nathan is an Assistant Professor of Finance (Practice) at the Indian School of Business (ISB). Prior to joining ISB, he was a resident faculty member at the School of Business, University of Connecticut, where he continues to hold a Visiting Faculty position. Before becoming an academic, he worked as an investment banker with JPMorgan Chase Bank in Hong Kong, New York, and Singapore, and has advised financial institutions and corporates in the Asia-Pacific region on hedging and risk management. He specialises in credit derivative, foreign exchange, and fixed income products. He has also advised corporates in the telecom, media, and technology sectors on mergers and acquisitions, divestiture, acquisition financing, capital structure advisory, alternative investments, and debt restructuring. He is also a consultant with the World Bank.
He holds a BTech in Electrical Engineering from the Indian Institute of Technology (IIT) Kanpur and an MBA from the Indian Institute of Management (IIM), Ahmedabad. He is a Chartered Financial Analyst (CFA), certified by the CFA Institute, Charlottesville, and a Financial Risk Manager (FRM), certified by the Global Association for Risk Professionals (GARP), New York. He earned a PhD in Finance and completed a postdoctoral fellowship at the Leavey School of Business, Santa Clara University.
Professor Vaidya Nathan is a regular columnist with the Financial Express (http://archive.financialexpress.com/columnist/k/1). He is the author of two books: Credit Risk Management for Indian Banks (Sage Publications, London) and Credit Derivatives (McGrawHill Education, New York).
He received the Most Outstanding Faculty Award at the University of Connecticut School of Business in 2014 and the ISB Alumni Endowment Research Fellow in 2019. He has previously served as Associate Dean (RCI Programmes) at ISB and was appointed Chairman of the LOCF Committee for Economics by the University Grants Commission (UGC). He is currently Faculty Director-PGP Finance.
