Thursday, October 14, 2010

Is the Fed out of ammo?

The money multiplier has collapsed, indicating that changes in the money supply will have a very small effect on the rest of the economy.  This is because the monetary base (what the Fed controls) is not affecting M1, the quantity of money.

HT: Merle Hazard

1 comment:

  1. This is true when measured against manufactured goods or labor intensive goods. When measured against commodities it isn't really all that true.