Money Supply

Money supply, a macroeconomic concept, is the quantity of money available within the economy to purchase goods and services. Because (in principle) money is anything that can be used in settlement of a debt, there are varying measures of money supply. The narrowest (ie. more restrictive) measures count only those forms of money held for immediate transactions.

Broader measures include money held as a store of value. Different measures of money have different technical definitions. Typically a measure has a name consisting of the letter M followed by a number. The higher the number, the broader the measure. For example, in the United States a measure of paper cash, the amount in checking or demand deposit accounts in circulation is called M1. A broader measure including M1 plus savings accounts, money market acounts and certificate of deposit accounts (CDs) under 100,000, is called M2. The broadest measure in use in the U.S. is M3, which includes M2 plus all other CDs and eurodollars held by the US.

Money supply is important because it is directly linked to inflation by the simple equation:

 velocity * money supply = real GDP * GDP deflator

where velocity is the number of times per year that money changes hands. The GDP (Gross Domestic Product) deflator is a measure of inflation. In other words, if the money supply grows faster than real GDP, inflation must follow as velocity has been shown to be relatively stable.

As of about the year 2000, the M1 money supply was about 1.3 trillion dollars, the M2 was 5.4 trillion, and the M3 was 7.8. If you split all of the money equally per person in the United States, each person would end up with about 26,000.

The amount of actual physical cash was about half a trillion as of the year 2000. To put this in perspective, if everyone who was part of the largest US bank Citigroup tried to liquidate all of their assests from there, there would not be enough cash.

One of the principal jobs of central banks (such as the US Federal Reserve Bank, the Bank of England and the European Central Bank) is to keep money supply growth in line with real GDP growth. Central banks do this primarily by applying pressure to interest rates. The extent to which central banks can influence interest rates is limited because interest rates are determined by the free market actions of the bond markets.

A very common criticism of this policy, originating with the creators of GDP as a measure, is that "real GDP growth" is in fact meaningless, and since GDP can grow for many reasons including manmade disasters and crises, is not correlated with any known means of measuring well-being. This use of the GDP figures is considered by its own creators to be an abuse, and dangerous. The most common solution proposed by such critics is that money supply (which determines the value of all financial capital, ultimately, by diluting it) should be kept in line with some more ecological and social and human means of measuring well-being. In theory, money supply would expand when well-being is improving, and contract when well-being is decreasing, giving all parties in the economy a direct interest in improving well-being.

This argument must be balanced against the near-dogma among economists, that the control of inflation is the main (or only) job of a central bank, and that any introduction of non-financial means of measuring well-being has an inevitable domino effect of increasing government spending and diluting capital and the rewards of gainfully employing capital.

Currency integration is thought by some economists -- Robert Mundell, for example -- to alleviate this problem by ensuring that currencies become less competitive in the commodity markets, and that a wider political base be employed in the setting of currency and inflation and well-being policy. This thinking is in part the basis of the Euro currency integration in the European Union.

Money supply remains one of the most controversial aspects of economics itself.

See also: money base, currency, inflation, central bank, financial capital, economics

Commercial Usage: Money Supply

Non-Fiction Usage: Money Supply

Subject	Topic	Quote
Economic History	Bolivia	This growth has been largely non-inflationary, thanks to the Central Bank's strict control of money supply growth. (references)
	Zimbabwe	Very high money supply growth rates in the first quarter of the year do not bode well for inflation reduction, as both monetary and cost-push factors are well embedded. (references)
	India	Inflation is expected to be in the 6-7 percent range for the current fiscal year due to high money supply growth and lower growth in agricultural and industrial production. (references)
Political Economy	PHILIPPINES	Open market operations serve as the main policy tool to control money supply. (references)
	KUWAIT	Kuwait's money supply (M2) in June 2001 was 7.4 percent higher than its June 2000 level. (references)
	VENEZUELA	It is anticipated that money supply will be tightly controlled to dampen inflationary pressures and support the Bolivar. (references)
Trade	India	It has sole authority for money supply management as well as for the administration of exchange controls and banking regulations. (references)
	Morocco	Until 1991, credit and money supply was controlled directly by the old French-style "encadrement system" allocating sectoral lending to banks based on historical patterns. (references)
	Greece	The Bank of Greece influences interest rates by using the discount rate and other interest rates in its transactions with commercial banks as tools to control the money supply. (references)
Source: compiled by the editor from ICON Group International, Inc.; see credits.

Speeches: Money Supply

Expressions: Money Supply

Frequency of Internet Keywords: Money Supply

Modern Translation: Money Supply

Language		Translations for "money supply"; alternative meanings/domain in parentheses.
Danish		pengemaengde (money in circulation, money stock, supply of money), pengeforsyning (money in circulation, money stock, supply of money). (various references)

Dutch		liquiditeitenmassa (money in circulation, money stock, supply of money), geldvoorraad (money in circulation, money stock, supply of money), geldomloop (money in circulation, money stock, supply of money), geldhoeveelheid (money in circulation, money stock, supply of money), geldcirculatie (money in circulation, money stock, supply of money), geldaanbod (money in circulation, money stock, supply of money). (various references)

Finnish		rahan tarjonta M1-käsitteen mukaan (money supply M1). (various references)

French		monnaie en circulation (money in circulation, money stock, supply of money), masse monétaire (money in circulation, money stock, supply of money), offre de monnaie (money in circulation, money stock, supply of money), disponibilité monétaire (money in circulation, money stock, supply of money). (various references)

German		geldvolumen (money in circulation, money stock, supply of money). (various references)

Greek		κυκλοφορούν χρήμα (money in circulation, money stock, supply of money), προσφορά χρήματος (money in circulation, money stock, supply of money), χρήμα σε κυκλοφορία (money in circulation, money stock, supply of money). (various references)

Italian		massa monetaria (money in circulation, money stock, supply of money), offerta di moneta (money in circulation, money stock, supply of money), denaro elastico (money in circulation, money stock, supply of money), circolazione monetaria (money in circulation, money stock, supply of money). (various references)

Japanese Kanji		マニ教 (manage, management, management consultant, management cycle, management game, management simulation, manager, maneuver, Manichaeism, mannequin, money, money building, money flow, money game, money handling). (various references)

Japanese Katakana		マネーサプライ . (various references)

Pig Latin		oneymay upplysay

Portuguese		massa monetaria (money in circulation, money stock, supply of money), vale postal (money order, postal order), oferta de moeda (money in circulation, money stock, supply of money), dinheiro em circulação (money in circulation, money stock, supply of money). (various references)

Spanish		masa monetaria (money in circulation, money stock, supply of money), recursos de dinero, oferta monetaria (money order), oferta de dinero (money in circulation, money stock, supply of money), dinero en circulación (money in circulation, money stock, supply of money). (various references)
Source: compiled by the editor from various translation references.

Anagrams: Money Supply

Scrabble® Enable2K-Verified Anagrams
	Words within the letters "e-l-m-n-o-p-p-s-u-y-y"
	-3 letters: plumpens, polysemy.
	-4 letters: employs, eponyms, eponymy, lumpens, peplums, plenums, plumose, plumpen, poleyns, polypus, pumelos, spumone.
	-5 letters: employ, ensoul, eponym, lemons, lemony, loupen, loupes, lumens, lumpen, melons, moneys, mousey, muleys, myopes, oleums, openly, peplos, peplum, peplus, plenum, plumes, plumps, poleyn, polyps, pumelo, pusley, pylons, sloppy, solemn, supple, supply, yupons.
Source: compiled by the editor from various references; see credits. SCRABBLE® is a registered trademark. All intellectual property rights in and to the game are owned in the U.S.A and Canada by Hasbro Inc., and throughout the rest of the world by J.W. Spear & Sons Limited of Maidenhead, Berkshire, England, a subsidiary of Mattel Inc. Mattel and Spear are not affiliated with Hasbro.

Domain	Definition
Economics	The amount of cash and bank deposits available in an economy. (references)
	Money in use to finance current transactions as distinct from idle money. Source: European Union. (references)
Source: compiled by the editor from various references; see credits.

Domain	Title
Books	Controlling the Money Supply (reference) Financial Innovation and the Money Supply (reference) Inflation and the Money Supply in the United States, 1956-1977 (reference) Money Supply and Deficit Financing in Economic Development (reference) The control of the money supply (reference) (more book examples)
Source: compiled by the editor from various references; see credits.

Speaker	Term	Phrase(s)
Gerald Ford	1974-1977	Only a reduction in spending can make it possible for the Federal Reserve System to avoid an inflationary growth in the money supply and thus restore balance to our economy.
Source: compiled by the editor from various references.

Expression	Frequency per Day
money supply	59
m1 money supply	9
m2 money supply	6
money supply us	4
m3 money supply	3
material money supply work	2
money supply u.s	2
equipment money supply work	2
fed money supply	2
growth money supply	2
m1 m2 m3 money supply	2
canada money supply	2
m1 m2 money supply	2
Source: compiled by the editor from various references; see credits.

Expressions using "money supply": money supply growth M1 ♦ money supply M1. Additional references.
Source: compiled by the editor from various references; see credits.

Money Supply

Definition: Money Supply

Money Supply

Noun

Specialty Definition: Money Supply

Specialty Definition: Money supply

Crosswords: Money Supply

Commercial Usage: Money Supply

Books

Non-Fiction Usage: Money Supply

Speeches: Money Supply

Gerald Ford

Expressions: Money Supply

Frequency of Internet Keywords: Money Supply

Modern Translation: Money Supply

Danish

Dutch

Finnish

French

German

Greek

Italian

Japanese Kanji

Japanese Katakana

Pig Latin

Portuguese

Spanish

Anagrams: Money Supply

Scrabble® Enable2K-Verified Anagrams

Alternative Orthography: Money Supply

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