How Much Money is There?

By Mike Hewitt (0 comments)

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 the least liquid (money as a store of value).

The following figure indicates compiled data for the most commonly used measures (M0, M1, M2 and M3) from 102 currencies representing 138 countries.

Three of the five monetary unions can be clearly seen above. The remaining two are the IEOM which uses the French Pacific Franc in three member countries, and the East Caribbean Currency Union which uses the East Caribbean Dollar in eight member countries.

The following graph shows the growth of money supply since 1971, a year selected for the reason that the last remaining currency to be convertible to gold, that being the US dollar, was made inconvertible on Aug 15, 1971.

Currency in Circulation

Four currencies (EUR, USD, JPY and CNY) comprise nearly 75% of all circulating banknotes and coins within the public domain.

Country/Union	Currency Code	Amount (Billion US$)	Percent of all Circulating Currency
European Union	EUR	1035.2	24.30%
United States	USD	850.7	19.97%
Japan	JPY	762.4	17.90%
China	CNY	492.3	11.56%
India	INR	140.3	3.29%
Russia	RUR	110.8	2.60%
United Kingdom	GBP	87.5	2.05%
Canada	CAD	43.8	1.03%
Switzerland	CHF	40.3	0.95%
Poland	PLN	37.7	0.89%
Brazil	BRL	37.3	0.88%
Mexico	MXN	34.3	0.81%
Australia	AUD	32.4	0.76%
Others (89)	-	554.9	13.03%

The following graph shows the historical outstanding stocks of M0 for currencies analysed in this essay.

It is apparent that the quantities of money are increasing in an accelerating fashion. In 1990, the total amount of currency in circulation passed US$1 trillion. Twelve years later, the total amount exceeded US$2 trillion. This doubled again less than six years later in early 2008.

The author is of the opinion that while we may likely experience a continual lowering of asset prices, the substantial increases to the money supply will lead to continuing higher prices for consumer goods.

This may lead to a view that both inflation and deflation are occurring simultaneously, but when one applies the classical definition of inflation - that being an increase to the money supply - such apparent discrepancies disappear.

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© 2009 DollarDaze

ABOUT THE AUTHOR

Mike Hewitt is the editor of DollarDaze.org, a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies. His website also provides a no-cost market data feed service with up-to-date quotes on currency exchange rates, commodity prices and major indices.