Your choice

You can dismiss this graph because it shows something called the money multiplier,

Graph #1: The Money Multiplier

or you can look at the damn thing and see what you can discover. Your choice.

Here's what I might do: Put a line on the graph.

Graph #2: The Red Line shows the Low Edge of a Trend Channel

My red line, just by eye, shows the trend of the first few years after the January 1987 peak in the multiplier. Remarkably, that same red line makes a good fit to the lows of the blue line, 20 years later.

Midway between those two periods, the blue line runs very close to the red for a good four years, punching thru it just once, at the end of 1999.

It is as if something set a minimum, a downtrending boundary below which the money multiplier could not fall, except by waiting for the passage of time to push that boundary lower. An interesting notion. But there is more.

There are stories, there must be stories behind those disturbances where the blue line runs up and away from the red -- in the early 1990s, then again in the 2000s -- and returns to the red line, once gradually, once suddenly. There must be stories.

The sudden return to red in the midst of the 2009 recession, that's crisis-related. Bernanke-related. That's an obvious one. But how about the eight years before that sudden drop? That is almost the whole decade of the 2000s, and all that time the money multiplier was running nearly flat. There was a stiff resistance to downtrend in the multiplier at that time. Now that's interesting. And that was during the Bush years.

Explain?

That's the second of the two disturbances. The other, the first, begins just after the 1990 recession, peaks at the end of 1993, and returns to red by around mid-1997. Can you explain this one? I think I can.

The blue trend away from red -- from early 1991 to late 1993 -- matches up with a unique downtrend in the debt-per-dollar (DPD) ratio. And the blue return to red -- from late 1993 to mid-1997 and then further, to the end of 1999 -- matches up with the return-to-trend of the DPD.

I went back and started with the blue line again, the money multiplier from Graph #1. I added my debt-per-dollar ratio in green.

Graph #3: The Money Multiplier (blue) and Total Debt per Dollar (green)

Both of these ratios use FRED's M1SL data series. This may account for some of the similarity that will soon become apparent. The blue line divides M1SL by the monetary base AMBSL. The green line divides accumulated public and private debt, TCMDO, by M1SL.

Next I eyeballed two trend lines -- red for the money multiplier, and black for debt-per-dollar.

Graph #4: The Multiplier and DPD with Trend Lines

On Graph #4, between the years 1990 and 2000 you see the disturbance where the blue line moves away from the red, and then gradually returns. This is the disturbance noted above, that I said I can explain.

For the same 1990-2000 period, you can see a disturbance where the green line moves away from the black, and then gradually returns. These two disturbances, the blue and the green, occur at the same time and display similar shapes. Except the one is the mirror opposite of the other.

I took Graph #4 and highlighted the disturbance areas:

Graph #5: The Multiplier and DPD with the Disturbances Highlighted

I think that's pretty interesting.

What does it mean? I don't know. But I don't need to know what it means, today. I never looked at the money multiplier this way, before today. I don't want to jump to any conclusions.

We have the beginning years, the middle years, and the ending years of the money multiplier all fitting themselves to that down-trending red line. And we have explained the first disturbance, the disturbance of the 1990s. All that remains is the second disturbance, the Bush years disturbance. Oh, but you were going to explain that one.

But hey, it's the money multiplier we're looking at here, so maybe you should just dismiss it.

It's your choice.