Federal Reserve Credit vs. Commercial Banks' Excess Reserves: Offsetting Factors in Early 2010

Gary North

Jan. 14, 2010

First, there is the increase in Federal Reserve credit, meaning the monetary base. This chart is published by the Federal Reserve Bank of St. Louis.

Second, there is the increase in voluntary excess reserves held by commercial banks at their regional Federal Reserve banks. This chart is published by the Federal Reserve Bank of St. Louis.

These are offsetting. The expansion of Federal Reserve credit of over $1 trillion has been matched by an equivalent increase in excess reserves.

This has led to an unprecedented decline in the M1 money multiplier. This chart is published by the Federal Reserve Bank of St. Louis.

Result: a rising consumer price index (up 2.7%) and an almost stable Median CPI (up 1.2%) through December 2009. This table is published by the Federal Reserve Bank of Cleveland.