Craig Eisele on …..

January 10, 2013

Would A Trader Buy This Chart?

Filed under: Uncategorized — Mr. Craig @ 10:34 pm

Global Macro Monitor

Note the bottoming of the M1 money multiplier after its long secular decline.  The multiplier is effectively the ratio of money created by the banking system (deposits) vs. money created by the central bank (reserves).

It collapsed and fell to below 1.0 after the financial crisis resulting in the current “liquidity trap.”  For every dollar the Fed “prints” — i.e., reserves it creates to purchase treasury securities, for example — the money supply (M1) increases by less than the reserve creation or expansion of the monetary base.  This is because depository institutions are hesitant to expand credit and have been shrinking their balance sheets while households have been deleveraging.   In addition,  the shadow banking system has collapsed and effectively shut down.

The excess reserves injected through the central bank’s asset purchases are held by banks earning 0.25 percent (IOER)  in an account at the Fed.


View original post 307 more words


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Create a free website or blog at

%d bloggers like this: