Subject: [OPE-L:1773] the money supply
From: Gerald Levy (glevy@pratt.edu)
Date: Tue Nov 30 1999 - 07:16:34 EST
Chai-on asked in [OPE-L:1772]:
> Does anybody know the difference between money and currency? Is a
> deposit account included in both of them?
> I need your answer urgently.
Since you need an answer urgently, I'm not going to even attempt to give
what might be considered a Marxist answer (although that might make a good
discussion by itself, e.g. "How has the money supply changed in
capitalist economies?").
The "standard" (i.e. neo-neo-classical) answer is that "M1" (the most
liquid part of the money supply) consists of currency held by the public
plus the balances in the transactions accounts.
A transactions account is defined here as a bank account that permits
direct payment to a third party (e.g. a personal checking account).
Currency is understood here to mean currency in circulation (i.e. the cash
that people hold).
Typically, currency in circulation in the US only constitutes a minority
(approximately 1/3) of the money supply. The rest of M1 consists primarily
of balances in demand deposit accounts at commercial banks and balances
in other transactions accounts (e.g. at savings banks and credit unions).
There are also less liquid parts of the money supply such as M2, M3, and
M3 + "near money", but these are unnecessary complications which I won't
discuss here.
I hope that helps.
To others: how can this be "translated" into Marxist terms?
In solidarity, Jerry
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