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Finance: What are M1, M2 and M3? 3 Views
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Description:
M1, M2, and M3 are different measurements of economic money supply. Ah, well...we were hoping it was some sort of James Bond, MI6 thing.
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Transcript
- 00:00
Finance allah shmoop what are m one m two and
- 00:04
m three Weren't those models of beamers are none None
- 00:09
And all right well maybe they're not james bond security
- 00:14
clearance things or the name of the cia soccer team
- 00:17
How about that M five m six and maybe not
Full Transcript
- 00:19
okay and one two and three are just different measures
- 00:21
or gradations for how we count the money supply in
- 00:25
the economy Think of these m numbers is analog is
- 00:28
teo def con one is like get ready for nuclear
- 00:31
war and def con five is like you know well
- 00:35
all is well on ly the m numbers here relate
- 00:39
to liquidity e how closely those m numbers approximate the
- 00:44
easily immediately available cash in the economy So em one
- 00:49
reflects the most liquid number and just includes paper currency
- 00:53
like you know dolla dolla bills and callings and things
- 00:56
like checking accounts in banks where you can walk in
- 00:59
and in an hour or less get a load of
- 01:01
cash we'll em one represents a relatively small slice of
- 01:05
the total m number in the economy or about one
- 01:08
and a half trillion box And yes that's a lot
- 01:11
Of nickels but it's relatively small in the kissing twenty
- 01:14
trillion dollars u s economy em two adds to the
- 01:17
m one totals What's called near money like the money
- 01:20
market securities savings deposits longer duration deposits like six month
- 01:25
cds up to one hundred grand and stuff like that
- 01:28
well em to totals almost eight trillion box these days
- 01:32
And kind of make sense People sock away more money
- 01:35
in cds and short term paper than they would dollar
- 01:37
bills in your wallet Right And it's A big delineation
- 01:40
Why Well it can be converted to money I'ii converted
- 01:44
to m one quickly So that's what those cds are
- 01:47
m three is the biggest slice of pie like mohr
- 01:50
savings bigger volumes and longer term duration Commitment to making
- 01:55
that two percent a year whatever you make these days
- 01:57
So m three includes stuff like time deposits more than
- 02:00
one your grand at euro dollar deposits over a hundred
- 02:03
grand Other things that can take more than a day
- 02:06
roughly to be converted into cash So m three is
- 02:09
somewhat less liquid than him One and two Got it
- 02:12
Well as long as all that makes sense to you 00:02:14.758 --> [endTime] Then well you know all is well
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