[ExI] M0 singularity... you're soaking in it

[Gordon Swobe]

> So, Gordon, help me better understand this "M1 Multiplier".  

The M1 Multiplier has plummeted to < 1 because banks have decided to keep reserves far in excess of that required by regulations, i.e., instead of lending money, they're hoarding it. That hoarded money might help keep banks solvent, but it does little to stimulate the general economy. 

The main point I want to make is that this is a sick economy in which monetary policy has become somewhat impotent. As I mentioned, much the same thing happened in Japan some years ago. The Japanese central bank could not cut its short term interest rate below zero, nor could it force banks to lend the proceeds of its open market purchases of government securities. 

Japan's quantitative easing may have averted a full-blown depression in Japan, and it no doubt helped to keep a few Japanese banks in business, but it did not cause much growth or price inflation. 

Then again, who knows what may happen here? We live in precarious times. This is uncharted territory for the United States, and for the world in general.

-gts