Re: [Pen-l] financial crisis: weird statistic.

[Rudy Fichtenbaum <rudy.fichtenbaum@xxxxxxxxxx>]

Jim,

You result does not surprise me. I have been following excess reserves 
since the beginning of the crisis and they are off the charts. If you 
graph excess reserves a few years before the crisis and then into the 
crisis you cannot even see excess reserves before the crisis because in 
relative terms they were so small compared to what they are today.

Rudy

Jim Devine wrote:
> Today, I calculated the "M1 multiplier," i.e., the ratio of the amount
> of checkable bank deposits and currency in circulation to the "high
> powered money stock" (currency + bank reserves). This measures credit
> creation by banks based on fiat money (money made by the Fed, with the
> government's backing).
>
> What's weird is that in December 2008 and January & February 2009,
> this number has been less than one (0.98, 0.92, and 0.98). That's a
> sign that commercial banks are refusing to lend. The increase from
> January to February is a sign that there's a glimmer of financial
> recovery.
>
>   

--
Rudy Fichtenbaum
Professor of Economics & Chief Negotiator AAUP-WSU
Department of Economics
Wright State University
Dayton, OH 45435
Phone: 937-775-3085
Fax: 937-775-2441

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