Money supply

under the money supply one understands the entire existence of money, which is available in a national economy in the economics. The sum of cash and deposits at call is called also material money supply. It covers itself with the money supply M1.

In the political economy and by the central banks different money supply concepts are regarded, which by a” M “is designated, followed by a number. To M1 and the following money supply aggregates M2 and M3 applies with the fact always that the money supply aggregate with a higher number includes with a lower. A lower number means besides a larger proximity of the regarded money supply to direct material-economical transactions. The demarcation of the individual aggregates is conventional; it is internationally not uniform. The so-called money basis M0 takes a privileged position. It represents the sum of circulation of money and central bank cash on hand of the credit institutes.

the European

central bank defines national money supply definitions for M1 to M3:

  • M1: Circulation of money without the cash in hand of the credit institutes (MFIs) as well as deposits at call of the non MFIs;
  • M2: M1 plus inserts with agreed upon running time up to two years and inserts with legal term of notice up to three months;
  • M3: M2 plus portions of Geldmarktfonds, Repoverbindlichkeiten, Geldmarktpapieren and bank debentures with a running time up to two years.

The German Federal Bank defined:

  • M1: (1998: 910.2 billion DM) Circulation of money and deposits at call (are subject to no term of notice and are available therefore at any time as currencies);
  • M2: (1998: 1302.7 billion DM) M1 plus time deposits up to 4 years maturity;
  • M3: (1998: 2239.8 billion DM) M2 plus savings deposits with legal three-month term of notice.
Geldmengenklassifikationen der SNB
Money supply classifications of the SNB

definitions of Swiss central bank:

  • M1: Circulation of money and deposits at call;
  • M2: M1 plus savings deposits in Swiss Franconia;
  • M3: M2 plus time deposits in Swiss Franconia.

quantity equation

the money supply M is linked over the quantity formula by Irving Fisher directly by the peripheral speed V and the sum of all sold products X, multiplied by its prices P:

<math> M \ cdot V = \ sum_n X_n \ cdot P_n </math>.

In practice the peripheral speed is measured however not directly, but computed over the placed in front equation. The sum of all sold products and their prices is equated with the gross domestic product (GROS DOMESTIC PRODUCT):

<math> V1 = GROS DOMESTIC PRODUCT/M1 </math>.

money supply in the debitism

in accordance with the economic theory of the debitism deviating from the dominant opinion does not only give it a money supply, but a credit quantity. Numbers to the money supply are regarded as phantom numbers, to which due to double reservations the purchase is missing to the reality. The controlling of the economy over the money supply leads to coincidence effects. Since money is generated exclusively over credits, each existing money “bought” according to opinion of the debitism already and is available also not more for demand. Excluding the expansion of the credit quantity (new indebtedness) has a demand effect.

Wiktionary: Money supply - word origin, synonyms and translations

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