yes
Bad bad hamster!!!
here is the OP
I hope the hungry hungry hamster doesn’t eat this one as what I’m asking is too short to squeeze into the title.
A couple of things - all can be taken as US$'s :
1 - how many physical bills & coins is in active circulation vs. how many physical bills & coins are out there? (again answer in US$ not number of bills or Canadian $'s)
2 - How much money is in our economy vs the number of bills in active circulation.
3 - if 2 has 2 different values then why is their a discrepancy? Can we somehow create more money (perhaps on paper) then is physically printed?
Easily. Most of the “money” in circulation these days is actually available credit, plus investments (which can of course become worth more than you payed for them; nobody sends out to the Bureau of Engraving And Printing to print up some bills for you when this happens).
According to the Federal Reserve about $617 billion in currency.
You ought to look up the “money multiplier effect” in a basic textbook of macroeconomics or monetary economics.
Basically, anything that can effect a sale can be considered to be money, and the more readily it can effect a sale the more liquid it is.
Take me for example. I generally walk around with fifty or sixty dollars in my pocket, and my current account has a balance of about $3,500. My bank holds cash reserves of 5%, which is to say that it holds $175 against my particular balance. So between my bank and me we’re holding only about $230 in actual cash. But most stores will take my cheques, let me pay by EFTPOS, etc. The total money I have available to pay for things is $3,550. Most of it is somewhat less liquid than cash (since parking meters and vending machines aren’t interested in cheques or debit cards), but it is still pretty liquid. The money multiplier has turned in this case $230 of Base Money into $3,550 of M2.
Then, I have an approved overdraft limit of $5,000. That is a sort of money, too. And somewhat less liquid, there is a $5,000 limit on my credit card. All of that is available to effect purchases, and therefore in an important economic sense it acts as part of the money supply.
If the Reserve Bank wanted to restrict the money supply a little (eg. to raise interest rates), it could sell bonds (and soak up cash). That is called ‘reducing base money’. Or it could raise the statutory cash backing rate to say, 6%, and thus force the banks to hold more cash. That would be reducing the money multiplier.
Regards,
Agback