The M1 Money Multiplier is the ratio of M1 to the St. Louis Adjusted Monetary Base (AMBSL). I thought it likely at the time that bank excess reserves dramatically increased when the financial crisis began. I figured that this is the case because the AMBSL includes “deposits held by depository institutions at the Federal Reserve Banks.” This is what I saw in November 2008 (St. Louis Adjusted Monetary Base):
By January of 2009 the M1 Money Multiplier dipped below 1 and it has stayed below one since that time (M1 Multiplier):
So I had another look at the AMBSL and saw this (St. Louis Adjusted Monetary Base):
What happened to Monetary Base in January 2011? Why did it spike again? Notice that the M1 Money Multiplier dipped. Have banks increased their reserves again? Why?
One thing that I haven’t been able to figure out is whether the AMBSL is capturing something else. Is it capturing “toxic assets” and recording them as bank reserves? If this indeed is the case, then what’s going on with the January spike? Has the Fed rescued something again? Please help me!