Monday, January 05, 2009

The Disappearing Money Multiplier

Econ prof Bill Seyfried of Rollins College emails me:
Here's an interesting fact that you may not have seen yet. The M1 money multiplier just slipped below 1. So each $1 increase in reserves (monetary base) results in the money supply increasing by $0.95 (OK, so banks have substantially increased their holding of excess reserves while the M1 money supply hasn't changed by much).