M3

  

Categories: Econ

See: M1.

We don't really track this number anymore. The data it follows became irrelevant in a globe driven by derivatives and credit promises rather than actual cash or cash obligations directly changing hands. So M3 went away with the Jonas Brothers and Fall Out Boy.

Related or Semi-related Video

Econ: What is Money Supply?4 Views

00:00

And finance Allah Shmoop What is the money supply the

00:07

money supply Well it's the supply of money Yeah Thank

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you everyone Good night All right We'll go to a

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bit more detail here first Let's define the money Part

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of the money supply will Money is the liquid financial

00:20

stuff moving around the economy And it's also all those

00:23

coins back Your couch Yeah it's liquid money And no

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we don't mean liquid like these things We mean liquid

00:30

like these things Yeah Ching Well money is cash no

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bills and coins and easily liquid lee sellable financial instruments

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that can get turned into cash very easily So what's

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money again Well the seven bucks you have in your

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wallet it's the sixty eight cents in change in that

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couch cushion right there Yeah along with a gun And

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it's one hundred twelve dollars Forty five cents in your

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Bank of America checking account Yeah that's counted his money

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to its liquid You could just sign a piece paper

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put the numbers on it and turns into catch value

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due right away So that's what we called money is

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in money supply We add up the stuff and everyone's

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while in their one's couch cushions Everyone's banking accounts and

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plus a few other types of accounts that quickly get

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turned into cash like money market accounts at a brokerage

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stuff like that And you've got the money supply in

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the economy That's it Well there are a few different

01:19

measures of the money supply M one m two an

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m three sounds like a list of promotional James Bond

01:27

bosses But no they're different That's different him Their economic

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statistics put together by the Federal Reserve to track the

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size of the money supply helps them kind of think

01:37

about what policies they want to implement We'll em One

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is the most narrow definition It only includes the amount

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of currency in circulation plus things that can get turned

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into currency almost instantly You know stuff like traveler's checks

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and the money and checking accounts Stuff like that Well

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em to then includes all the stuff in M one

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plus the money and things like savings accounts And while

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some money market accounts that kind of stuff then we

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have M three but includes all the above stuff plus

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some long term deposits like you commit to putting five

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grand and your savings account of Bank of America You

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can't withdraw it early or you pay a big penalty

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So that's kind of a long term deposit You get

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a little bit more interest in return for being ill

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liquid for six months So all those numbers those dollars

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are included an M three But well guess what It

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got expensive to track him three And now they're federal

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Cut the budget and Fed just doesn't track him three

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anymore Over time the Fed noticed that money supply measures

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really didn't relate a strongly to economic performance as they

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once did like thirty forty fifty years ago Well the

02:37

process started in the eighties and by two thousand six

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the Fed decided that tracking M three as well you

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know more trouble than it was worth Well the feds

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still tracks and wanting him to though uses those stats

02:47

less and less than it used to mean ing away

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back in the twentieth century for making policy decisions Yeah

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anyway in two thousand eighteen M one set at about

02:56

three point seven trillion dollars an M to it about

02:59

thirteen point nine trillion noticed How much bigger M too

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is an M one Okay so that's the money part

03:05

of money supply But what about the supply concept here

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Well the basic concepts of economics are all about supply

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and demand Right But when we think of supplying the

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man we think of the supply and demand of a

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product There's only so much triple ripple chocolate peanut butter

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ice cream in the world that's supply or the supply

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of it Four hundred ninety two million pounds That's it

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Well there are many people who think it's the best

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flavor and want to eat it by the gallon That's

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demand Those air people are willing to pay four bucks

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a gallon for it or whatever cost not supply then

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meets the man How do you dio and you get

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a price But notice something about that price That price

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here Well it's given in money There's a second supply

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situation going on in any price The money supply You

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know how your great grand parents will say things like

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when I was your age and ice cream cone cost

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a quarter It's not that they used to eat little

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itty bitty tiny ice cream cones Things used to cost

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less at least in nominal terms like it took less

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cash to get stuff fewer pennies like back then Penny's

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actually matter And that didn't have anything to do with

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the supply or demand for ice cream It had to

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do with the supply of money For as long as

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most people can remember while things have been steadily getting

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more expensive right or at least more dollars to buy

04:17

stuff that's inflation The value of a unit of money

04:20

like the dollar has gone down because well there are

04:23

more of them more units of money floating around making

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things more expensive more supply of money Things cost more

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in terms of the amount of dollars But we also

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earn Mohr you know in terms of the amount of

04:35

dollars right Like a good wage a hundred years ago

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was like a dollar an hour maybe a dollar a

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day and today it's like a dollar a minute Go

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to see your dentist Been there done that Well that's

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why when you compare prices or wages with the past

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you have to use an inflation adjusted figure right You

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want to measure the buying power of a particular dollar

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otherwise things in the past always looked really cheap right

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Like we might talk about things in nineteen seventy two

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dollars Yes we're kind of anchoring the notion of the

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money supply itself Released how valued that money was alright

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Recap time Money supplies the amount of cash in an

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economy along with certain financial instruments and accounts that get

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turned into cash pretty easily The Fed measures money supply

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of U S dollars using m one m two They

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used to have a thing called them three but no

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BMWs driving that around now And the money supply comes

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into play in the way prices air set When buying

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something you have the supply and demand dynamics of the

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product you're looking to buy But you also have the

05:30

amount of available money Yeah which goes into the price

05:33

of things as well That's it Enjoy your fudge ripple

05:36

there Well count coins

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Econ: What are the Neutrality and Superneutrality of Money?
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What are the Neutrality and Superneutrality of Money? Codified as a term by economist Friedrich Hayek (author of, The Road to Serfdom), the Neutral...

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