Money Multiplier

• The Money Multiplier is a measure of how banks are re-lending deposits back into the system
• The Money Multiplier is made possible by Fractional Reserve Banking

Money Multiplier after the 2008 Recession and QE Programs

• The Multiplier dropped significantly from >8 in 2007 to 3 in 2013
• This happened after the FEDS QE programs
• Although the monetary base increased dramatically, banks did not lend out all the money
• Monetary Base Increased >375%
• M2 only rose about 50%
• They instead hoarded the extra money as extra reserves and collected interest on it from the Federal reserve

Money Multiplier After Quantitative Tightening

• The multiplier has started to increase after 2017
• The monetary base is decreasing thanks to QT
• M2 is increasing