Home Forums Hunting & Shooting Hunter's Campfire Money supply M1 and M2

How many of you remember this from the early 1980's ?? I remember getting daily briefings on the money supply from CNBC or some such cable news show. The talk was always about the M2. In other words, how much was available to the banks to loan out. It may be a bull market in the stock exchanges today but the long term outlook is not as bright.

It seems the M2 is the money that is readily available and the money that was in bank accounts at banks and credit unions across the county. I see that America is losing it's M2 supply of available money. This from the Motley Crew

https://www.msn.com/en-us/money/mar...e0ec6307b44f04a5a08e6391e3c0ca&ei=32

U.S. Money Supply Hasn't Done This Since the Great Depression, and It Usually Signals a Big Move to Come in Stocks
Story by Sean Williams •
14h
U.S. money supply hasn't done this since 1933
While there are a handful of money supply measures, M1 and M2 are the two that economists tend to focus on the most.

M1 money supply encompasses cash and coins in circulation, as well as demand deposits in a checking account. Think of M1 as easily accessible money that can be spent at a moment's notice. M2 accounts for everything in M1 and adds in savings accounts, money market accounts, and certificates of deposit (CDs) below $100,000. It's money people can still get to with relative ease, but it requires a bit more work to be spent. It's this latter category that's raising eyebrows and ringing alarm bells.
Historically speaking, M2 has risen at a relatively steady pace for more than 150 years. As the U.S. economy grows, more capital is required to facilitate transactions. But in those rare instances where M2 notably declines, trouble has followed.
(click the link to see the chart)

As you can see from the chart above, M2 money supply has dipped from a peak of $21.7 trillion in July 2022 to $20.77 trillion in November 2023. M2 is down a little over 2% on a year-over-year basis and 4.31% from its all-time high set in mid-2022. It's the first notable drop in M2 money supply since the Great Depression.

People are having to dip into savings to make ends meet on a monthly basis due to high prices & inflation.

MM

If M2 is personal savings in banks?
🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣



That has to be at an all time low,
or else it's an indicator of modern wealth distribution.


Half my grandparents had more than $10,000 in savings in the 80s.
When that would buy a new pickup.
(The other half were always broke, despite earning than the ones with money)

Today, only 20% of retired Americans have $10k.


One factor is 401k/IRA investment, a bigger one is the modern attempts
to buy happiness and maintain debt instead of cash.

A kabillion dollars of money got piled up during the Covidiocy from government stimmy checks to PPP loans, to all the subsidies and “programs”. Add to that all the businesses that sat on money because, well, they couldn’t buy stuff to build, and if they could buy stuff to build, there wasn’t anybody to hire to build it.

Now that money’s getting spent.

The end.

New Money is created when Loans are Originated
By the Banks ..

So if that ain’t Happening..

You take it from there .

401Ks and other such plans certainly represent a lot more of savings today than a traditional savings account. While I do keep a certain amount of cash in savings, I put the vast majority of my savings in retirement funds since I can easily borrow that money back if needed. The idea is I'll make more in the long run with the money parked in a 401K than the interest I earn in a savings account. Doesn't always turn out that way though.

It is not.

bank saving accounts used to pay meaningful interest. They don't today. The national average savings account rate is currently 0.57 percent. Not much incentive to save at your local bank.

I’m the 80’s the Fed could Crash the Economy to Break Inflation without Crashing the Federal Government but that ain’t the Case Now ..

If that needs explaining then Your Definitely Haven’t Been Paying Attention..

Have You Noticed that All the Short Term Budget Deals are in the Trillions Now ..

Same now as it was then - live within your means.
If you are currently getting .57% on your money in the bank you need to look around. I just renewed a CD @ 5% and get the same 5% on the balance in my checking account.

That is the problem. If no one is borrowing then fewer people need services like a new car or to have a garage or house built. The money is getting used for "right now" expenses and not long term expenses.

kwg

Then what is it. I can only tell you what I just read. Help us out.

kwg

Yup.. Heard 5.5 the other day when I was in the bank but we had nothing ready to move quite yet.

Notice the shorter term CD's are paying more than long? At least they were end of last year, we rolled some bucks into a 1 year CD at 5.6, IIRC the 2 year was at 4.3.
They must think rates are going to fall pretty soon.

Higher interest is kryptonite to our giant national debt and cost to service it.

M1, M2, M14? I don't get it at all. But to simplify it for me...how do you maintain a middle (consumer) class when the price of a new vehicle spirals out of reach for half the working middle class? How do you become a middle class homeowner when median home price in most states is well north of 600,000? I just don't get it, we were told back when, that the middle class workers drove the economy, when the middle class fared well, then the whole economy fared well. Didn't the Reagan tax cuts cause the govt to end up with a surplus from all the consumerism of a booming middle class?...But now? It seems the goal posts have shifted dramatically.

Some of you tell me...the money is there, it just isn't being held in highway robbery savings accounts...ok. But I suspect there is no extra money to put anywhere, 401's , brokerage accounts etc. I'd say after taxes, fees, inflation, energy costs, payroll stagnation, healthcare (we are paying for more than 30 million new residents who don't contribute much to the system, but are still getting benefits)...there is no disposable income. But, I live in Appalachia West, so maybe I don't have a good vantage point. People here are hurting.

M1 is the purple and got spiked.
M2 is the blue and stayed low.

M1 and M2 money are the two mostly commonly used definitions of money.
M1 = coins and currency in circulation + checkable (demand) deposit + traveler's checks.
M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits.