Money Supply

by Smith

About Latest Releases and Updates Money Supply Database


This is a page with three major goals in mind:

1 - Compile Austrian Money Supply statistics
2 - Analyze recent central bank and currency news
3 - Pontificate on future money supply movements

Regarding the first, despite the somewhat pretentious name, "True Money Supply" is indeed what it is called, and is followed developed by the Austrian school. Here, we follow a variant of TMS that closely follows M1, and is more precisely defined as the following:

Base currency (not to be confused with the monetary base, which includes reserves and excess reserves): the face value amount of fiat physical U.S. notes, dollar bills, and coins circulating.
+ Demand deposits: the amount held in checking accounts and other forms of immediately refundable deposits.
- Demand deposits due to the Treasury and depository institutions
- Federal Reserve float and cash items in process of collection.
+ Supplementary Financing Program.

This is related to what is known as TMS1, or AMS developed by Frank Shostak. This differs from the other Austrian money supply measure, TMS2 developed by Joe Salerno by disclusion of savings accounts funds, and Shostak's original AMS by the inclusion of the Supplementary Financing Program. We do so for the followings reasons:

* Regarding savings accounts, Salerno has stated that, "Both demand and savings deposits are federally insured under the same conditions and, consequently, both represent instantly cashable, par value claims to the general medium of exchange. The objection that claims on dollars held in savings deposits typically do not circulate in exchange…while not unimportant for some purposes of analysis, is here beside the point." As a thought experiment, assume we were following Dave Ramsey's envelope method of budgeting. We had two envelopes, one labeled "Groceries," and the other labeled, "Hoard." To take the argument to its extreme, what we are arguing is that if we place the money into the envelope labeled "Hoard" with the express intention of hoarding the said money, then it is no longer a medium of exchange, and until such point where it is 'unhoarded' should not be considered money. Thus, we do not count savings accounts as part of the money supply (do not mistake this for saying that hoarding money is bad, it is most definitively a good).
* Regarding SFP, this is really rather a minor point, and mainly depends on whether one thinks the FED is doing something funny with SFP. Given the lack of transparency by the FED regarding the dispositions of SFP, and given the FEDs not-so-trustworthy history, we include SFP. This puts our analysis at minor odds with Shostak, but given the small amount (in terms of the total money supply) of SFP, not enough that we feel uncomfortable calling it AMS still. This means that our data has a huge peak in 2008! However, this is a feature, not a bug. As it points out that monetary statistics are incredibly dodgy during the 2008-2011 period.

Regarding the second bullet point, The Mises Institute maintains an analysis and a compilation of USD True Money Supply (TMS) statistics, a statistic very much in the same line of the Austrian tradition. However, the reason for this blog is to cover for two deficiencies of this analysis. First is that we agree more with AMS than TMS, as we have just stated, but also because we aim to provide commentary and statistics for the other major reserve currencies as well. We decide which reserve currencies to focus on at the moment based on overwhelming share of forex reserves, which as of this writing is

+ Euro

Should this change, then we will drop reporting and add reporting as necessary. For comparison, we will keep a note of the total gold stock. However, this does not tend to change very much. We might add the Pound and Yen, depending on the general level of work desired. Also, for no particular reason, we look at

+ Argentine Peso

Because why not.

This brings us to the last of the three bullet points. Our 'pontificiation' over four money supplies means that our analysis will necessarily be a tad bit more international than the Mises Institute's coverage, and means it will display an interesting analysis regarding their respective battles for reserve currency status. In the future, we might add more currencies, depending on how difficult it is to compile and analyze AMS figures for just the four.