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> Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/s
by username332211 3y ago
> Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role.
Well, what you seem to be describing is M2, aka actual money available for spending. Which is a rather large factor in the general price level.
- kcatskcolbdi 3y agoYes, the parent comment is describing M2. Do you have any rationale for why you believe it is a large factor in general price levels?
- username332211 3y agoMV=PY?
- HDThoreaun 3y agoWhat about V though?
- mg 3y agoNo. That is exactly my point: That the change in M0 is the source of increased prices, not changes to M2 (apart from the changes that are in M2 because M0 is in M2). Think about it this way: How can M2 increase without M0 also increasing? Then we can look at those mechanisms and determine if they are to "blame" for the recent price increases. I think they are not.
- Naijoko 3y agoIsnt the whole point of economical growth that m2 will be more money than m0? Isnt it increasing by trade?
- imtringued 3y ago>Think about it this way: How can M2 increase without M0 also increasing? It is quite simple. There are no reserve requirements anymore.
- michaelt 3y agoAs I understand it, when people talk about the government "printing money" they don't mean literally producing more coins and notes (M0) but rather something metaphorically equivalent. For every $1 in notes and coins, there are about $30 in bank deposits that exist as a number on a spreadsheet somewhere. So instead of actually printing more, when the central bank "prints money" it means they edit the number in their spreadsheet, increasing their own bank balance. Then they spend that balance buying things like government bonds and treasury bills (which also exist only on spreadsheets)