4 ms·

Define "issued". M1 is typically checking accounts and cash. M2 is stocks and things that are easily convertible into money. The rest of the M's are defined sim

Define "issued". M1 is typically checking accounts and cash. M2 is stocks and things that are easily convertible into money. The rest of the M's are defined similarly, but the exact definitions vary from person to person. M1 is always an estimate for every country on earth because you can't just take a snapshot of every bank's ledger all at the same moment and expect all the money to be there. You lack the necessary time granularity and there's a lot of gray areas like money mid-transfer between banks (missing from one, not yet written in the other), money in a van on its way to being destroyed, money in a van from the mint to a bank, bankruptcy proceedings, etc. To work around that, central banks ask retail and commercial banks to provide monthly balance sheets to prove they are stable, and base estimates off that. The IMF/World Bank do something similar with central banks that are members. The good news is that you can find M1 estimates easily from relatively authoritative sources[0] that are good about citing their sources. [0]: https://fred.stlouisfed.org/series/MYAGM1CNM189N https://fred.stlouisfed.org/series/MYAGM1CNM189N

_iyig 7y ago
Thanks for the detailed answer - right on the money, so to speak. Follow-up question: does M1 include funds that are digitally issued from a central to a private bank, such as loans from the Fed to (for example) Wells Fargo? If so, are these funds considered fungible for purposes of digital transfer, such as via the SWIFT Network, or does each dollar / unit of currency have some notion of a traceable serial number as for physical bills? I guess what I'm asking is less a finance question, and more a software question. If a bank in China (or the U.S., or anywhere) sends a SWIFT message of deposit to another bank, to what extent can the recipient verify the chain of trust in the funds' existence all the way back to the central issuing authority? If they cannot, it would seem that any private bank could de facto "print money" central bank-style by issuing fraudulent SWIFT requests. Perhaps they'd get caught, or maybe not, if they colluded with the relevant authorities.
- steventhedev 7y ago
  Regarding the specific definition of M1, you'll have to research. I'm not a banker or an economist, I'm just remembering a macro econ course from 10 years ago. It's entirely possible that the US Federal Reserve Bank has a different definition of M1 than the People's Bank of China. Money has always been fungible, even nonfiat money. The second you have lenders in society and allow them to back loans using deposits, they effectively create money. The ratio of loans to deposits is called the cash reserve ratio, and it's pretty heavily regulated. As for the trust question, the answer is in your question. Swift and other interbank settlement systems are independent (or co-owner) organizations that require a massive security deposit to explicitly handle the situation where a bank says "transfer 1000 to A with account with us from account B in your bank" where the transfer wasn't backed or authorized or anything like that. It's important to note that there are both pull and push systems. ACH is an example of a system that can pull. All of this is because banks don't trust each other especially if they aren't beholden to the same regulatory authority.

_iyig 7y ago

Thanks for the detailed answer - right on the money, so to speak. Follow-up question: does M1 include funds that are digitally issued from a central to a private bank, such as loans from the Fed to (for example) Wells Fargo? If so, are these funds considered fungible for purposes of digital transfer, such as via the SWIFT Network, or does each dollar / unit of currency have some notion of a traceable serial number as for physical bills? I guess what I'm asking is less a finance question, and more a software question. If a bank in China (or the U.S., or anywhere) sends a SWIFT message of deposit to another bank, to what extent can the recipient verify the chain of trust in the funds' existence all the way back to the central issuing authority? If they cannot, it would seem that any private bank could de facto "print money" central bank-style by issuing fraudulent SWIFT requests. Perhaps they'd get caught, or maybe not, if they colluded with the relevant authorities.

steventhedev 7y ago
Regarding the specific definition of M1, you'll have to research. I'm not a banker or an economist, I'm just remembering a macro econ course from 10 years ago. It's entirely possible that the US Federal Reserve Bank has a different definition of M1 than the People's Bank of China. Money has always been fungible, even nonfiat money. The second you have lenders in society and allow them to back loans using deposits, they effectively create money. The ratio of loans to deposits is called the cash reserve ratio, and it's pretty heavily regulated. As for the trust question, the answer is in your question. Swift and other interbank settlement systems are independent (or co-owner) organizations that require a massive security deposit to explicitly handle the situation where a bank says "transfer 1000 to A with account with us from account B in your bank" where the transfer wasn't backed or authorized or anything like that. It's important to note that there are both pull and push systems. ACH is an example of a system that can pull. All of this is because banks don't trust each other especially if they aren't beholden to the same regulatory authority.