10 Years After: M1 Money Multiplier FINALLY Exceeds 1.0 As Banks Reduce Their Excessive Reserves

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

It has been an agonizing 10 years since the housing bubble collapse and the financial crisis, not mention a surge in banking regulations such as Dodd-Frank and the creation of the Consumer Financial Protection Bureau.

But 10 years after, the M1 Money Multiplier has FINALLY broken through the 1.0 barrier.

m1m111418

The M1 Multiplier means that every dollar created by the FED (an increase in the monetary base M0) will result in a <1 dollar increase of the money supply (M1), as is evident from the figure below. So, the credit and deposit creation of commercial banks is limited in this case. The banks are still holding on to a lot of excess reserves, but that amount is finally starting to comedown so that the M1 Money Multiplier has finally broken the 1.0 barrier.

excioer

 

m2yoyvel

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.