Where Is The Money Going?

The public usually does not understand and often does not follow the gymnastics of the Federal Reserve. Pity. The Fed has more indirect influence over the American economy than any other single institution.

Occasionally I go diving into the money supply movements. What I've just seen is that the multiplier has only crept over 1.0 twice in the last year and has been consistently below 1.0 for most of that time. The most recent number shows that for every dollar the Fed creates, only 85 cents is making it into the economy.

Where is it going? Most likely into bank capital reserves. In other words, banks are either holding it to increase their reserves, cannot find suitable loans to make with it, or both. This is what a buddy of mine calls pushing a rope.