Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Quantitative Easing is Nothing New

Interest-Rates / Quantitative Easing Jan 31, 2011 - 03:17 AM GMT

By: Mike_Hewitt

Interest-Rates

Best Financial Markets Analysis ArticleThe term 'quantitative easing' is just the newest term to describe the on-going central bank policy of increasing money supply.

Greetings. There has been an increasing amount of news covering the activities of The US Federal Reserve and other central banks. The newest expression being bantered about is "quantitative easing".


Simply put, quantitative easing is a phrase, more a euphemism really, to describe the process of increasing the monetary supply - printing money so to speak. It is a continuation of actions that central banks have been engaged with ever since their creation.

I would like to show a chart of monetary expansion since 1971 to the present. We will begin with what people most typically think of when they think of money - that being banknotes and coins in public circulation. Economists call this M0.

Here is a chart showing a timeline from 1971 to the end of 2010. Along the vertical axis is a dollar figure.

Estimated Global Currency in Circulation

The first currency shown is the US dollar. By the end of 2010 there was 920 billion in US dollars. It is estimated that perhaps up to two-thirds of this circulates outside the borders of the United States.

Our next currency is the Japanese yen. Over 86 trillion yen circulates among the public. This represents an amount equivalent to more than US$1 trillion.

The euro is represented in blue. There is just fewer than 840 billion euros in circulation - equivalent to US$1.1 trillion. These three currencies represent nearly 60 percent of the value of all physical paper currency within the public domain.

The fourth most significant paper currency is the Chinese renminbi, also known as the Chinese yuan.

The remaining 131 currencies shown in this chart are represented in grey. Together, these 135 currencies amount to US$5.2 trillion.

At the end of August 1971, when the US dollar was taken off the last vestiges of the gold standard, the total amount of currency was equivalent to US$171 billion. This means, that over the last 40 years, the nominal valuation of all paper money has increased by more than thirty times.

But, there are also other types of money. Namely, demand deposits and savings accounts. Economists classify different types of money using the following convention.

Money as a Store of value and a Means of Exchange

This table shows the different types of money commonly defined by economists. The bottom represents the most liquid forms of money, which are used primarily as a means of exchange. The broadest measure of money defined here, is M3. This includes forms of money used as a store of value.

Let's now return to our first chart. We will re-label all of these circulating currencies as M0 and represent them in blue.

Now we will add the global estimates for all demand deposits in order to compute M1. As you can see, the amount of money held in demand deposits exceeds that of currency in circulation by nearly four times.

To this amount of money - equivalent to US$25 trillion - we will now add savings accounts and small time deposits. This is M2. The amount of money in M2 is even greater than that in M1.

Finally, we add in those monies captured under M3.This brings our estimate for the total amount of money to over US$75 trillion.

Estimated Global Monetary Aggregates

I hope these charts illustrate the magnitude of monetary expansion that has occurred over the last forty years. Every increase to the existing money supply dilutes the value of the currency already in existence. In other words, those people holding paper money lose purchasing power to create value for the new money. It is, in effect, a transfer of wealth to recipients of newly created money. Quite simply, it is theft.

Common usage of the word "inflation" is the phenomenon of rising prices. I hope that these charts have shown that this price inflation is not a natural process of the free market but, the result of deliberate policy, namely the central bank policy of ever increasing the money supply.

May you find these words helpful in preparing yourself. Thank-you for watching.

Global money supply data available at www.DollarDaze.org

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.


Post Comment

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