On Friday we discussed transactional money, and I showed two different measures of the money supply, M1 and M2. These both represent transactional money, with M2 being a slightly broader measure.
Today we're going to go over another measure of the money supply, known as the monetary base (MB). Those of you who enjoy discussing the Fed (myself included) may get a kick out of this one, because this is where all that wonderful QE comes into play.
Let's start with a chart. This is perhaps the most frequently presented chart regarding the money supply, and I've read many books which use this chart as the primary evidence for why our economy is ill-fated. While anything is possible, and I won't rule out the possibility of economic demise, a simple glance at this chart without understanding the larger context is not enough to scare me into getting rid of everything I own that's ... Log in or subscribe to continue reading.
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