trying to understand Money-Supply ?

Depends on which definition of "money" you choose. It's a very large component of M1.
what is "inside Money" ? is not "inside Money" equal to (M2 - M0) ?

Depends on what you define as "money". Like I said before, different things have a different amount of "moneyness". Obviously currency is money. Demand deposits are money. Are time deposits money, for whatever context we're in? Are money market funds money? For whatever definition of "money" you decide is appropriate for your given context, yes, "inside money" will be M - M0.



i'm confused. A bank "right now", has some slew of liabilities (customer Deposits, for which the bank is liable); simplistically, they have 10x as many assets (loans, fractionally-backed by liabilities). They also have some Vault cash. You withdraw your $100, and close your account. They have used your $100, to make 10x as many loans. So, they pull another (fungible) $100 from their Vault, and "re-back" the $1000 in loans, with their own Money. Their excess-Reserves decline by $100, their required-Reserves remain constant ?

It depends on their demand for reserves. If they say "given expected drains on deposits it's optimal to hold $1 billion in free reserves", then no they won't take $100 out of their excess reserves, they'll contract their liabilities instead.

Another reason banks might hold excess reserves is so that they can sell them in the Fed Funds market.

I just regressed log(NGDP) on log(Base) in Eviews; R^2 of 0.972. Fairly compelling evidence that the base drives the nominal economy.

you said that, with "inside Money" created endogenously, increasing Money-supply should correlate with decreasing Money-Velocity.

For a given monetary base that's true. If the monetary base is changing then that's going to cause deviations in the supply of inside money from the demand for it.

at this moment, i don't understand what you mean about "regressing...in Eviews"

Eviews is an econometrics program. I just did a linear regression of the monetary base on NGDP.

you're talking about a scatter-plot, of nGDP vs. MB, for numerous countries ?

For the US, but it's not a scatter plot, it's linear regression. Have you done any statistics or econometrics yet?
 
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inside money is a net zero asset. For everybody who holds inside money as an asset, there is a counterparty for whom that inside money is a liability. Whereas the monetary base forms a net asset since it originates outside the financial system...

Debt is debt... Some person gives another person a loan, a contract is formed. Inside money is a special case of debt where that contract can be used as a medium of exchange. Inside money is a subset of debt. Some debt can be used as money, some debt can't.

so, if total debt is c.$60T, then c.$60T (less interest on principals) has been loaned to individuals/corporations/Government ?

and, if total "inside Money" is c.$15T, then...

i'm still confused -- if every outstanding debt "today" was once "yesterday" a loan of Money... then where did all the once-existing, once-loaned, Money-of-yesterday, "go" ? how can total debt, representing the "after echo" of some comparable loan of Money, exceed the total amount of Money ?

you're saying, that the total debt has not (appreciably) increased, due to interest ?
 
Depends on what you define as "money". Like I said before, different things have a different amount of "moneyness". Obviously currency is money. Demand deposits are money. Are time deposits money, for whatever context we're in? Are money market funds money? For whatever definition of "money" you decide is appropriate for your given context, yes, "inside money" will be M - M0.
"inside Money" is defined as "Money deriving from (co-created) debt", so "inside Money" must have been lent into existence, by a bank? So, workers depositing paychecks, into demand Deposits, are not "inside Money"; but the bank using their deposits as "Reserves", as pretext for creating 10x in new loans, would represent "inside Money" ?

what happens, when i buy a widget on a credit-card; and the other party uses my "inside Money" paid to them, to pay off their credit-card (or interest payments on the same) ? can created Money pay off created debt ?





It depends on their demand for reserves. If they say "given expected drains on deposits it's optimal to hold $1 billion in free reserves", then no they won't take $100 out of their excess reserves, they'll contract their liabilities instead.
wouldn't your $100 be part of those "expected drains" ? (you're emphasizing, that banks have options; either they can re-back existing loans, with Vault-cash-converted-to-replacement-Reserves; or they can call in loans, "contracting liabilities"; or some combination?)



For the US, but it's not a scatter plot, it's linear regression. Have you done any statistics or econometrics yet?
For the US, using a series of annual (nGDP,MB) data points ? if nGDP,MB are linearly related, wouldn't the VB=nGDP/MB be stable & near constant ? what if you use MZM ?
 
inside money is a net zero asset. For everybody who holds inside money as an asset, there is a counterparty for whom that inside money is a liability. Whereas the monetary base forms a net asset since it originates outside the financial system...

Debt is debt... Some person gives another person a loan, a contract is formed. Inside money is a special case of debt where that contract can be used as a medium of exchange. Inside money is a subset of debt. Some debt can be used as money, some debt can't.

so, if total debt is c.$60T, then c.$60T (less interest on principals) has been loaned to individuals/corporations/Government ?

and, if total "inside Money" is c.$15T, then...

i'm still confused -- if every outstanding debt "today" was once "yesterday" a loan of Money... then where did all the once-existing, once-loaned, Money-of-yesterday, "go" ? how can total debt, representing the "after echo" of some comparable loan of Money, exceed the total amount of Money ?

you're saying, that the total debt has not (appreciably) increased, due to interest ?

Well that's why money is cool, right? The same money can be used in multiple transactions, again and again.
 
The same money can be used in multiple transactions, again and again.
but each time, new debt = new money

so how can debt > money ?

if two things always move in tandem, together, in lock-step... how does one outpace the other ?
 
China storing trade surplus in (high-interest) "time deposits" & MMFs ?
[M3-M2] has been sky-rocketing, since NAFTA c.1993, and since Pres. Clinton granted MFN status to China c.1994:
M3 - M2 = "large time-deposits (>$100K)"
M3 + MMF - M2 = "large time-deposits (>$100K)" and "Money-Market Funds"
fredgraph.png


banks lend out all customer deposits ?
total bank credit tracks [M2-M0] = "checking + savings deposits + (small) time deposits + MMAs"
[M3-M0] includes "(large) time deposits", and correlates less well, suggesting that banks do not lend "large" time-deposits back to individuals
fredgraph.png
 
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MB underpins total "Money-supply", average "reserve Ratio" near 10:1
fredgraph.png
 
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if most "money" is actually "credit" ("inside Money"), then total Debt reflects total "Money"-supply; Debt by sector (Individuals, Corporations, Government) reflects "sector Money" (?)
GDB = I + C + G
MI ~= DebtI
MC ~= DebtC
MG ~= DebtG

VI = I / DebtI
VC = C / DebtC
VG = G / DebtG
Individual Money moves half-a-dozen times faster, than Corporate & Government Money:
fredgraph.png
 
"inside Money" is defined as "Money deriving from (co-created) debt", so "inside Money" must have been lent into existence, by a bank?

It's a debt obligation. It doesn't have to be lent into existence, it just has to be a debt obligation.

So, workers depositing paychecks, into demand Deposits, are not "inside Money";

Yes they are. What's a cheque? A cheque is a bank's promise to pay a negotiated amount when presented and cleared. It's not currency. It's an obligation, created by a bank, to pay a certain amount in currency if desired. But, the cheque can also be used as a medium of exchange (as "money). I can pay people in cheques. Therefore, it's inside money.

If you got paid in cash, that would be outside money. When you deposit that at the bank, you're swapping outside money for inside money, demand deposits.

what happens, when i buy a widget on a credit-card; and the other party uses my "inside Money" paid to them, to pay off their credit-card (or interest payments on the same) ? can created Money pay off created debt ?

Absolutely.

It depends on their demand for reserves. If they say "given expected drains on deposits it's optimal to hold $1 billion in free reserves", then no they won't take $100 out of their excess reserves, they'll contract their liabilities instead.
wouldn't your $100 be part of those "expected drains" ? (you're emphasizing, that banks have options; either they can re-back existing loans, with Vault-cash-converted-to-replacement-Reserves; or they can call in loans, "contracting liabilities"; or some combination?)

Maybe, maybe not. That's why when trying to understand things we use "ceteris paribus". We say "for a given reserve demand, what would happen if velocity increased". Then later on, once you understand the basics, we can let reserve demand fluctuate. It's impossible to understand how something works if you don't isolate the different effects and study them independently.

For the US, using a series of annual (nGDP,MB) data points ? if nGDP,MB are linearly related, wouldn't the VB=nGDP/MB be stable & near constant ? what if you use MZM ?

Yeah but we don't know how important fluctuations of base velocity are. That is, say it goes from 10 to 20. So what? Is that big or small? If it goes from 1 to 2 that's a change of 100%, but it's also a change of 1. If it goes from 10 to 20 that's a change of 100%, but it's also a change of 10. We don't know how we're supposed to interpret the size of changes. So just look at correlation. The correlation between MB and NGDP is huge.
 
The same money can be used in multiple transactions, again and again.
but each time, new debt = new money

You have $1. I want to buy a coke. I borrow the $1 off you, I pay the person selling me the coke. You have nothing, I have a coke, the coke vendor has $1. New debt has been created; I now owe you $1. Where's the new money?
 
MB underpins total "Money-supply", average "reserve Ratio" near 10:1
fredgraph.png

You realise that nobody can follow this right? Not just this, but your posts in general. Short sentences with partial thoughts in them and lots of notation may make sense to you (obviously, they're coming from your head so you clearly understand what they're supposed to mean), but they don't to anybody else. We need english sentences and explanation. I don't know what you're thinking; you need to use your writing skills to make sure that people reading your posts understand what ideas you're trying to communicate.
 
It's a debt obligation. It doesn't have to be lent into existence, it just has to be a debt obligation... A cheque is a bank's promise to pay a negotiated amount when presented and cleared. It's not currency. It's an obligation, created by a bank, to pay a certain amount in currency if desired. But, the cheque can also be used as a medium of exchange (as "money"). I can pay people in cheques. Therefore, it's inside money.
"inside Money" = "IOU"

that total "inside Money" (M2) tracks total personal Debt implies that (generally) "inside Money" originated in a loan, then subsequently entered into the economy (with whatever was bought with that loan, e.g. car, house), and began "diffusing" through the stream-of-spending ?

(per your example) were i a bank, i lend you $1; you buy a coke; Coke pays their employees & share-holders; they all buy groceries, pay off their own debts, etc. But, ultimately, even if "lost & forgotten", was an original loan. Most "inside Money" originally was lent into existence, by persons borrowing, to finance purchases, whose producers passed the "new [credit-]Money" on into the economy ?


If you got paid in cash, that would be outside money. When you deposit that at the bank, you're swapping outside money for inside money, demand deposits... The correlation between MB and NGDP is huge.
because the MB is the "Reserve" underpinning broader Money (M2) ? The ratio of MB:M2 ~= 10, as i showed in a chart, because banks can only generate new credit-Money, from "cash Reserves" (MB). If i deposit a check; my bank cannot use my check Money to back more loans. Only if i deposit "hard outside-Money" (MB) can my bank expand liabilities (make more loans). Thus (generally) M2:MB ~= 10. So, GDP tracking "MB" is nearly equivalent to GDP tracking broader Money. And, GDP = MV; ceteris paribus GDP ~ M.

what about Velocity, all measures of V have been declining since c.1980 ? You're saying, that whilst V has been declining, M has been increasing faster, "driving" GDP growth up even against the "undertow" of "slowing" Money ?
 
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The money supply=cash+debt or M0+M1+M2+M3
The money supply expands and contracts based upon
1)supply and demand for money
2)the money multiplier

This is the simple version.

Of course it is more complex than this. The federal reserve is the ultimate gate keeper over the money supply or monetary base, while M1 and M2 are predominantly made by banks.
 

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