Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Growth of Global Money Supply

Economics / Money Supply Jan 12, 2009 - 01:27 PM GMT

By: Mike_Hewitt

Economics Diamond Rated - Best Financial Markets Analysis ArticleThis essay analyzes the growth of the money supply for 73 selected currencies from 90 countries. Nineteen of these countries belong to two monetary unions - the European Union and the East Caribbean Union. 1 Together, these countries make up 96.7% of the world's Gross Domestic Product (GDP) and 84.1% of the world's population . 2


Countries included in analysis

There are several different monetary aggregates used to measure a nation's money supply. These monetary aggregates can be thought of as forming a continuum from most liquid (money as a means of exchange) to least liquid (money as a store of value). 3

The measures, while not completely consistent across different countries, may be generalized as follows: 4

Monetary Aggregates

There are two other monetary measures worthy of mentioning:

M4: A less commonly used monetary aggregate, also known as "extended broad money". Depending on the country, it includes M3 + other types of deposits (such as those held by expatriate citizens or by various governmental agencies). This monetary measure is released by only a few countries.

TMS: ("True Money Supply") is a monetary measure developed by Murray Rothbard and Joseph T. Salerno of Austrian School of Economics fame which defines money as the final means of payment in all transactions . 5 The TMS consists of the following: Currency in Circulation, Total Demand Deposits, Savings Deposits, U.S. Government Demand Deposits and Note Balances, Demand Deposits Due to Foreign Commercial Banks, and Demand Deposits Due to Foreign Official Institutions. 6

The monetary aggregates compared in this analysis are the widely used M0, M1, M2 and M3. Global money supply data for this analysis was collected from official central bank websites , and the name of each country has been hyperlinked back to the source data for reference purposes.

Monetary Aggregates for Selected Countries

Not every country publishes all four of the common monetary aggregates. The United States ceased publishing M3 on May 23, 2006 . However, various independent sources have continued to publish U.S. M3 figures. One such provider of U.S. M3 money supply data can be found here .

In situations where a reliable alternative source was not identified, the lower order monetary aggregate was used, such as for China which does not publish M3, so M2 was used as a substitute.

All money supply figures in this analysis are taken from October 2008 where possible because of the high availability of data for that date. At the time of this publication, many money supply figures for the month of November are not yet available and only a few countries have released those for December.

For each monetary aggregate, the two charts show:

  1. Annual growth in percentage
  2. Annual growth in US$ billions

For the first calculation, the volume of currency of each each country was determined over a twelve month period and divided by the country's total outstanding currency in 2007 to provide a percentage increase.

To determine the annual growth in US$ billions, this same volume was converted to USD as per the exchange rates for the last business day of Oct 2008.

The currencies for the European Union (EUR), United States (USD), China (CNY), Japan (JPY), United Kingdom (GBP), Russia (RUR), India (INR), Brazil (BRL), Canada (CDN) and Switzerland (CHF) were included in each percentage growth chart because of their global economic and financial significance.

M0 - Currency in Circulation

As of October 2008, the nations used in this study combined had the equivalent of US$ 3,934 billion in public circulating banknotes and coins. The average percentage growth for currency in circulation from the 73 currencies in this analysis was 9.3%, which amounts to an annual increase of US$ 335.9 billion on the US$ 3,598 billion from Oct 2008. 7

Annual M0 Growth in %
Annual M0 Growth in US$ Billions

The Euro, Chinese Yuan and US Dollar were responsible for 55.1% of the increase in global M0. Together, these three currencies added the equivalent of US$ 185.1 billion to all banknotes and coins in public circulation.

M1 - Money

As of Oct 2008, there was the equivalent of US$ 19.2 trillion in demand deposits and public circulating banknotes and coins. The average percentage growth for money from the 73 currencies in this analysis was 5.0%, which amounts to an annual increase of US$ 908.7 billion on the US$ 18.2 trillion from Oct 2008.

Annual M1 Growth in %
Annual M1 Growth in US$ Billions

The Euro, Chinese Yuan and Pound Sterling were responsible for 58.5% of the increase in global M1. These three currencies together added the equivalent of US$ 531.3 billion to the global money supply.

M2 - Money and Close Substitutes

As of Oct 2008, there was the equivalent of US$ 45.2 trillion in money and quasi-money (savings and time deposits). The average percentage growth for money and close substitutes from the 73 currencies in this analysis was 10.0%, which amounts to an annual increase of US$ 4.1 trillion on the US$ 41.1 trillion from Oct 2008.

Annual M2 Growth in %
Annual M2 Growth in US$ Billions

The Euro, Chinese Yuan and US Dollar were responsible for 58.4% of the increase in global M2. Together, these three currencies added the equivalent of US$ 2.4 trillion of money and money substitutes to the global M2.

M3 - Broad Money

As of Oct 2008, there was the equivalent of US$ 58.9 trillion in broad monetary aggregates. 8 The average percentage growth for broad money from the 73 currencies in this analysis was 9.6%, which amounts to an annual increase of US$ 5.2 trillion on the US$ 53.7 trillion from Oct 2008.

Annual M3 Growth in %
Annual M3 Growth in US$ Billions

The Euro, Chinese Yuan and US Dollar were responsible for 61.7% of the increase in global M3. These three currencies together added the equivalent of US$ 3.2 trillion to the global broad money supply.

Historical Growth of the Global Money Supply

Compiled official global money supply data was used to create the following chart, which clearly shows an inflationary trend in the world's money supply from Jan 1970 to Oct 2008. 9

Global Money Supply from Jan 1970 to Oct 2008

It is important to keep in mind that the traditional definitions for inflation and deflation refer to changes in the money supply and not to changes in prices, which are affected by other factors including supply and demand. Thus, while an increase in money supply may likely lead to an increase in the price of a good, it may not necessarily do so.

Due to the rapid appreciation of the US dollar near the end of 2008, there has been a recent decline in the value of the global money supply, as seen on the extreme right-hand side of the chart. It should be noted that while the value of the money in the latter half of 2008 may have declined, the volume of virtually every currency increased.

This recent strengthening of the US dollar and subsequent decline in the value of the global money supply is the result of a sharp demand for the currency caused by large portfolio-holders selling assets en mass in response to a global financial collapse. The author speculates that this 'flight to the dollar' will not last very long and that its value will fall as rapidly as it rose.

Notes

1  European Union includes Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia and Spain. The East Caribbean Union includes Anguilla, Antigua & Barbuda, Dominica, Grenada, Montserrat, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines.

2  There are three agencies that tabulate Gross Domestic Products for countries - the International Monetary Fund (IMF), the World Bank, and the Central Intelligence Agency of the United States (CIA). Data for this calculation was taken from the IMF.

3  The "liquidity" of an asset is its readiness to be used as an accepted means of exchange to meet immediate and short-term obligations.

4  For instance, the Bank of England does not publish official numbers for M1, M2 or M3. For this article, estimates using European Economic and Monetary Union (EMU) aggregates for the U.K. are used. These standards are based on those employed by the European Union.

5  For instance, credit cards are not money, because use of a credit card in the purchase of a good does not finally discharge the debt created in the transaction. Instead, it gives rise to a second credit transaction which is concluded when you pay your monthly credit card bill. Mutual money market funds, while highly liquid and nominally fixed to a set value, are also not money because they first need to be sold in order to be reimbursed.

6  While the author is a proponent of this measure of money, for the purposes of this essay, comparisons were made using M0, M1, M2 and M3 because of their widespread availability from many countries.

7  Data for the month of Oct was not available for all currencies in the study (DZD, PKR, AED, SYP, IRR, BWP, HRK, ISK, JMD, LYD, PHP, RON, and ZAR). The dates are indicated on the table for reference. The aggregate value for growth from these thirteen countries was US$ 10.8 billion (or 3.2% of the total).

8 Previous analyses by the author have indicated similar sized monetary aggregates for a study of only 25 economic areas. It should be noted that currency conversion rates have a significant impact on cross-country comparisons. The USD underwent a large appreciation in the last half of 2008 which resulted in a lower value for other currency money supply figures.

9  Some amount of estimation was used to create the level of continuity necessary to draw a meaningful chart. In many cases, either a constant ratio to the US money supply or calculated monthly average was used.

By Mike Hewitt
http://www.dollardaze.org

Mike Hewitt is the editor of www.DollarDaze.org , a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies.

Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision.

Mike Hewitt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Long John Silver
19 Jan 09, 11:32
Money Supply

Helpful collection of data, but not much good until updated for November and December. I think the next version of this will be an eye-popper...


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules