Government Money Supply Growth In The Last Three Months

Money supply refers to the amount of money that is present in an economy. There are different methods that are used to measure money supply, and one of the methods that is used by different governments is to only consider money that is used to buy goods and services like hard cash present in checking accounts. Money supply is a good indicator of inflation, GDP and consumer index prices.

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In the US, the government money supply is measured by the Federal Reserve Board. The figures connected to this amount are updated on a weekly basis by the Board. It has been seen that when the Federal Reserve is looking to expand its money policy, it adds more money to the banking system so that more loans are available for people. This is primarily used to boost economic growth.

The components of money supply are as follows:

M1 refers to the cash that held by the public. It also includes cash in the form of traveler's checks, demand deposits, negotiable order of withdrawal accounts, automatic transfer service accounts and credit union share drafts.

M2 refers to the all the cash in M1 plus the savings and small cash deposits in the form of time deposits. In addition, it also includes, mutual fund shares owned by individual investors and money market deposit accounts.

M3 includes M2 and large denomination time deposits, shares in mutual funds owned by institutions, commercial papers, and certain Eurodollar accounts and deposits.

The last component of money supply is L, which includes M3 and all long term liquid assets. It also includes US saving bonds, short term securities issued by the Treasury department, bankers' acceptance and commercial papers.

According to some financial experts, the government's money supply growth in the last three months is growing. According to these experts, the M3 money supply is growing at the rate of 6 percent. However, before you get excited about this growth, you should realize that it has actually reduced. In the beginning of 2009, the M3 money supply growth stood at 17 percent.   

In addition, since the beginning of 2009, the M1 money supply growth stands at 16 percent.

This may seem like good news to many people that the economy is on its way to recovery. However, the Federal Reserve just announced that the household wealth in the US has actually dropped to $11.1 trillion since 2008. And, the drop has been $5.1 trillion is the last three months alone.

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