United States Money Supply M2 (2024)

FAQs

What is the M2 supply in the US? ›

US M2 Money Supply is at a current level of 21.05T, up from 21.03T last month and up from 20.79T one year ago.

M1 and M2 money are the two mostly commonly used definitions of money. M1 = coins and currency in circulation + checkable (demand) deposit + traveler's checks + saving deposits. M2 = M1 + money market funds + certificates of deposit + other time deposits.

M1, M2 and M3 are measurements of the United States money supply, known as the money aggregates. M1 includes money in circulation plus checkable deposits in banks. M2 includes M1 plus savings deposits (less than $100,000) and money market mutual funds. M3 includes M2 plus large time deposits in banks.

The reason behind the fall in M2 is straightforward.

The Fed's reduction in its own balance sheet reduces the amount of money supply as the central bank is no longer reinvesting the proceeds from its matured bonds back into the system.

M2 is seen as a reliable predictor of inflation, so it might be counted among the leading economic indicators. M3 is considered by some economists to be an even better predictor of inflation.

Answer and Explanation:

In the given statement, credit cards are not included in M1 and M2 as purchases done from credit cards serve as a loan to the credit card company to an individual who holds a credit card. M1 money includes the physical currency, and the medium of exchange is the use of debit cards and ATMs.

Gold isn't any form of money in today's world. It has a value, but cannot be used as a currency, or a substitute for money. This is because it cannot be considered to be similar to notes, coins and deposits. Thus, gold does not fall in any of the money categories - it is neither M1 and M2, nor M3.

Government backs the money supply.

In the United States, the money supply is backed up by the government, which guarantees to keep the value of the money supply relatively stable. Such a guarantee depends mostly upon the effectiveness and management of silks of the government with regards to the money supply.

The smallest and most liquid measure, M0, is strictly currency in circulation plus commercial bank reserve balances at Federal Reserve Banks; M0 is often referred to as the "monetary base." M1 is defined as the sum of currency in circulation, demand deposits at commercial banks, and other liquid deposits; it is often ...

Here, we see that a bank-dominated financing structure and a high saving rate will drive up the M2/GDP ratio, both theoretically and empirically. In the early 20th century of China, its under-developed financial market and special regulatory structure led to both a reliance on bank financing and a high saving rate.

Why are credit cards not considered money? ›

Short Answer. A credit card isn't considered money because it does not serve as a store of value or a unit of account. Even though it can facilitate trade as a medium of exchange, it essentially does so by extending credit (a promise of future payment), and not by representing actual stored value.

Central banks affect the quantity of money in circulation by buying or selling government securities through the process known as open market operations (OMO). When a central bank is looking to increase the quantity of money in circulation, it purchases government securities from commercial banks and institutions.

Since April 2021, money supply growth has slowed quickly, and since late 2022, we've been seeing the money supply repeatedly contract, year over year. The last time the year-over-year (YOY) change in the money supply slipped into negative territory was in November 1994.

Lines of credit increase liquidity, which is ultimately what counts in terms of enhancing aggregate demand. When someone uses a credit card in a purchase, he automatically expands the money supply.

M2 money supply is contracting the most since the 1931 through 1933 stretch (during the Great Depression). Granted, the current M2 decline of nearly 4% is nothing compared to the money supply contraction of almost 30% that occurred during the early years of the Great Depression.

M1 money supply includes those monies that are very liquid such as cash, checkable (demand) deposits, and traveler's checks. M2 money supply is less liquid in nature and includes M1 plus savings and time deposits, certificates of deposits, and money market funds.

The M2 money supply includes near money and has intermediate nearness. It includes everything in M1, plus savings deposits, time deposits under $100,000, and retail money market funds.

The price of converting 1 M2 (M2) to USD is $0.0002145 today.