So, it the fed allowed banks to report client's accounts in a different way, so although there were not counted as M1 in the past, now they are considered M1?
(I've read this a couple of times I'm still not 100% sure I understand what's going on).
Look at it this way: M2 money supply includes M1 money supply. If you look at M2, you’d expect to see the same step-function increase because it includes M1, yet we don’t see it.
This step function is just an artifact of moving some things from M2 to M1, not because the government printed all of that money.
(I've read this a couple of times I'm still not 100% sure I understand what's going on).