100 Percent Reserves?
Tyler Cowen, among others, has observed that M1 (the narrowest measure of the money stock that includes bank deposits) has had a money multiplier of around 1 since November. This means it is covered 100 percent by bank reserves. But this is just another manifestation of both (a) the Fed's mistake of paying interest on reserves and (b) the irrelevance of M1 as a monetary measure. As a result of Greenspan's deregulation, most individual checking accounts are now classified as savings accounts (under the regulatory category of"money market deposit accounts") in M2 and are not part of M1.