Historical M2 vs M3

November 14, 2005 2:18pm by

Does the more rapid growth of M3 over M2 signify anything ?


M2 Money Stock (non seasonally adjusted)
M2_money_stock_1105

M3 Money Stock (non seasonally adjusted)M3_money_stock_1105

See also:   Changes in M1, M2, and M3 over Time

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  1. Andy commented on Nov 14

    I think the strange thing is that M3 was such a small part of the money supply for so long! According to the Fed, M3 is M2 plus institutional money funds and certain managed liabilities of depositories, namely large time deposits, repurchase agreements, and Eurodollars.

    Since Eurodollars includes dollar-denominated bank accounts held in China, Russia, Saudi Arabia, etc., that is probably a big and growing component. The growth of the repo market is another. According to this article:
    http://www.atimes.com/atimes/Global_Economy/GI29Dj01.html
    the repo market is the “biggest financial market today”. I always thought it was currencies though.

  2. The Prudent Investor commented on Nov 14

    M2 has a time-lag and does not contain electronic money. The chairman designate is famous for his speech from 2002 where he told the world about the weapon of the (electronic) printing press which guarantees a never-ending supply of dollars at virtually no cost. As the dollar’s value is also determined by how many of them are around I would appreciate it very much if this figure will always be around for reference. I also want to point out that Greenspan said last April “we can guarantee cash but we cannot guarantee its purchasing power.” Many more dollars for only little more economy = INFLATION = destruction of savings.
    But that is actually very good for debtors. Now help me, who is the biggest debtor in the world and has no plan whatsoever to apply fiscal prudence and who was/is his chief economic advisor…
    Sorry, but I can’t prevent panicking if this decision towards more secrecy at the wrongest of all places does not get reversed and not even a gin and tonic will relieve me from this fear. An inflation target won’t help if we can’t determine the spread between money supply and GDP growth. I won’t fly by night without instruments. Is this the BIG pivot point for the dollar?
    And we haven’t even started the discussion about the lack of repo data from next March on. The fed holds ever bigger amounts of repo agreements, buys ever bigger parts of government debt and now wants to do it all in the darkroom. Is this sound monetary policy?
    The Euro may not look good either but the ECB applies a degree of transparency that can be a model for the Fed.
    Also don’t take Greenspan’s remarks about the lessons that can be learned from the demise of the pound sterling too easy. He would not point at such events if they were completely unimaginable.
    And coming to an end; don’t you think it is better to know about the multi-trillion difference between M2 and M3 than to wake up to a big suprise one day? Every democratic government/economy needs to run a complete balance sheet if it won’t get the reputation to be an instrument for self-service of the privileged.

  3. sc commented on Dec 12

    scsc sc

  4. jack commented on Mar 28

    Great post.

  5. sara commented on Mar 30

    Great post keep up with good job.

  7. Denis commented on Aug 4

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