Longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren’t necessarily the paragraphs I have put them in below, and there may be things in between that I didn’t highlight).
Part of the reason that monetarism failed to produce the anticipated results was due to changes brought about by globalization.
Nevertheless, the monetarists would have met with greater success if they had broadened their definition of money even further. Their mistake was to fail to see that there is no distinction between fiat money and credit. They should have included all dollar-denominated credit instruments in their definition of money. Or, put differently, they should have replaced money with credit in the equation of exchange, because by the 1980s there was less and less difference between the two. Now there is essentially none.
...because of financial innovation, credit has become more like money. Most credit instruments have long met the three criteria that define money. They can serve as a medium of exchange, they are a store of value, and they are a unit of account. In the past, however, they were not liquid. Now they are. The repo market makes them liquid. The repurchase market allows the owner of any credit instrument to obtain cash immediately by agreeing to repurchase that asset at a specified date in the future. Treasury bonds, municipal bonds, corporate bonds, GSE debt, and asset-backed securities are all now completely liquid. In other words, the entire $52 trillion in credit market debt outstanding is liquid and, therefore, money-like.
So, with money having become more like credit and credit having become more like money, there is little point in making any distinction between the two. Moreover, in recent decades, the quantity of credit has become so great relative to the quantity of money that it has made money irrelevant.
The principal reason that monetarism became incapable of achieving the results expected of it was that money became indistinguishable from credit. After 1968, the thing that had been money, gold, made up a smaller and smaller fraction of the money supply, so small that it became completely irrelevant to the overall economy. It is the credit supply, not the money supply, that counts now. Therefore, the quantity theory of money must be revised to incorporate that change.