[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
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The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.
Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.
I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.
I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).
Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:
