Money supply: M0, M1, and M2 | The monetary system | Macroeconomics | Khan Academy

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In this video, learn about the two measures of money that are part of the money supply - M1 and M2 - as well as the monetary base (which is sometimes called M0).
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Macroeconomics on Khan Academy: Topics covered in a traditional college level introductory macroeconomics course
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[@belisebibi2399]

The amount of topics and subjects that I have learned from this man😊🙏🏽

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He is amazing, so clear and concise on so many topics.

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The amount this guy has helped my life is immeasurable.

[@sandysutb]

Wow, you explain complex things in an easy manner. Thank you, much appreciated

[@aloushaloushful]

I have trying to grasp and understand the M's for a while now ... this is simply put and very well explained ... Thank you very much, your videos are just perfect

[@defaultuser9423]

I think the simpler way to say this would be that banks can create credit up to M times their deposits.

[@ThomasLickert]

Thank you for providing me the basic concepts of money and financial definitions.

[@TheDarkestNiggaHere]

His IQ is more than I can count to.

[@victorelnecave5157]

this guy must be a genius.

[@mohammedwells1186]

Instablaster...

[@valerieyang6281]

Thank for your sharing .It's informative

[@EphraimAtkinson]

Thank you for answering my questions :)

[@samjohnson3124]

wow, the M0-M1-M2 money supplies are a conjugated phenomenon. (thank you very much Dan Winter, thank you)

[@jonnysantos5074]

Great explanation. I like how the colors separate entities

[@ukfullmovie]

thank you .. is there a video that covers all mony transaction in one economy ?

[@AndrewLLFrazier]

Can you do a video on M3 money supply?

[@michealmonroe4264]

This video is brilliant, thanks.

[@jackcullen69]

Money printer goes BRR

[@ransel8417]

thanks for explaining, i was having trouble with this

[@gemreeren]

amazing video ,thanks a lot

[@kittenkits]

It was a real great help....thank u :-)

[@symbiotesam3562]

I am studying to take an economics test to teach the subject in Georgia and this video was very helpful in understanding this concept. thank you very much.

[@priyankatheartist8643]

that's cool

[@manuelgissing3449]

thats cool good luck!greetings from austria :)

[@burakcebeci5725]

at 7:13 when he is masuring checkable deposits dosen't he do doube counthing on one dolar of PB#2 which has been alrady counted as a one dolar in the pocked?

[@irfankazim944]

which multiplier creats more M1, M2 or M3? and how? give simple answer plz

[@monkeydog8681]

This dude is a legend. He helped me get through engineering school.

[@christianrusso128]

This man is a gift from god

[@langa1533]

What is the best site to follow up M2 broad money supply?

[@tomlindsay7861]

so this is all free? I love this guy

[@Austin1990]

This completely neglects that central banking employs double-entry accounting for an elastic supply. It looks like I have to go back to central bank papers to learn the real definitions of the monetary supply figures.

[@caricus2079]

So, what happens now that the m2 is no longer different to m1, because is so liquid that there’s no sense to differentiate from one-another?

[@evanwilliamson3602]

Informative video, however the initial debt that was printed would’ve required interest, which also would’ve been created out of thin air, thus increasing the existing debt (currency) in circulation.

[@encodersofia]

3:30 I can't imagine someone borrowing money from one bank to deposit the money in another bank. Sure way to lose money from interest difference

[@M.-.D]

encodersofia you essentially do that when you purchase a house with a mortgage. Except it is not your account, simply someone else. He removes the consumer transactions for ease of following. Concept holds though.

[@TheOneAboveAllx]

Also I know people doing that to diversify as you can only get 250k FDIC's insurance when a bank goes bankrupt

[@kaberle71]

@@TheOneAboveAllx Only 100k per account in Canada!

[@nateisawesome766]

​@@TheOneAboveAllx as they're doing rn

[@AerialRush]

Safe assets to save your money in is scarce materials like gold, silver, copper etc. Buy those. Anyways, I love khanacademy!

[@lazzerbear]

why does this not have 300,000 views?

[@et7992]

Enough Thank yous, but what does it mean when banks "write checks"?? Doesn't matter, beautiful drawings though.

[@user-bc9pk5fr2s]

thank you Sal, love it

[@AulasdeBolsa]

We use the same explanation for Credit Cards?

[@theamericanmoderate]

What a pyramid scheme

[@Volticymo]

For real

[@jonojam]

@@Volticymowhere did you think they got the idea, it’s always been this way…

[@samjohnson3124]

curious, I'm beginning to think this is a nested energy system, like the chakra system. only down in the red chakra are things "manifest" like cash is, but as you go up in the chakras, they become more abstract and less physically explicit-limited.

[@TheIntroducemyself]

Thanks for video:) I'v watched previous video but I still don't understand. Previous video says there's some money ON DEMAND,thus PB(Private Bank)can't loan out these money. So,how can PB can loan out money from checking account? (the money in this account is on demand. be able to withdraw at anytime) I know Fractional reserve banking,but that is the Money No.1 in the PB#1,am I right?

[@krzysszymanski4922]

Although the money is on demand, the bank does not keep it all on. The bank basically hopes that there not everyone will want to withdraw all their money at the same time. If too many people want to withdraw their money and the bank has lent too much, it goes bankrupt (this is a bank run).

[@s.s4102]

after i watch this vid, can’t understand

[@iTzDWUUUUUUU]

can you be my professor...for all my courses

[@nootnoot1878]

man, this makes no absolute sense in my head without accidentally double counting

[@Thegamemakur]

Khanacademy should start handing out KZbin diplomas

[@samjohnson3124]

very interesting to think of Dan Winter's "conjugated charge implosion" in all this, only phi based energy harmonics are capable of constructively "nesting ontop of each other" without destroying anything/any-value, like russian matrioshka dolls nest within each other non-destructively. here it seems the money supplies are nesting ontop of each other non-destructively, but in a way modern manufacturing is a conjugated nesting of efforts too, and indeed the independent manufactureres of components can improve their own portions of what they contribute, adding value to the overall product, even if the larger-host product hasnt made as many progressive value additions as a minor independent manufacturerer has to the product.

[@Canadian789119]

was M3 gold?

[@mfabanwy]

Are physical assets money? You can sell them.

[@PoojaSingh-su7lg]

I didn't get u

[@qaqambandzuzo289]

He's running around the bush

[@billytheweasel]

@@qaqambandzuzo289 disagree, he uses generalized terms for clarity, that's about it. ie; the fed doesn't print money, treasury does that vis the US mint

[@chinodomcharles-beke2136]

You probably know everything!

[@henry3397]

Literally was just thinking this lol. Learned math from this guy years ago, and now that I’m into finance turns out he knows about that too.

[@LECityLECLEC]

@@henry3397 He studied electrical engineering ans has a harvard MBA. I don’t think Sal knows everything, he just loves learning and he loves teaching. The first person he taught was himself, and that’s why he is so knowledgeable. With such a strong math background, he’s just connecting all the dots. If we ask Sal does he know everything-I think he’d tell us the truth...he’s only scratching the surface of something very big!

[@docreynolds4697]

Thank you

[@mdhasnain_3764]

good explanation

[@avemaria4788]

Thanks

[@bbeaum1]

Around 6:45, should you perhaps say "checkable reserves?" I see a lot more "reserves" than just $2 worth, unless i misunderstand how you are defining "reserves."

[@watwutqwerty9150]

by reserves he means the money banks have to keep in their reserves. which is one dollar per bank here.

[@robertcalamusso4218]

Thx Great.

[@bilawalminhas7689]

Thanks Sir

[@Flor.3ncia11]

y u so smart!

[@blgdinger3]

If you have a tough time getting rid of $1 billion worth of Pez dispensers you clearly need to start networking and meet the right people

Absolutely nothing, which is one of the main critics to the fractional reserve banking system. As strange as it may sound, the power of increasing and decreasing the money supply in the economy is in the hands of Private Banks

[@alexmijareslagunero]

Why were the savings accounts counted 2x since 1USD went from bank A to bank B?

[@durgeshprasher5410]

awesome

[@teekastian]

great topic! i looked for this clear explanation for a while now, great job! just a quick question, at the beginning you mentioned the central bank prints money then they go buy bonds then the money will flow into the bank, when you buy bonds that means the money should be used for government projects right? I don't see how these newly fresh printed money will become available for the market, as they were used to buy securities or any other purposes, how does this work exacly? I lost there :) or bonds also can mean just borrowing money to circulate more money in the economy, the when economy expands the government will earn more tax money, and they will pay the coupons from bonds with this extra money, is this roughly how it works? thanks in advance for your answer :)

[@jaytweet9494]

The FED is not buying new securities from the government in this example, they would be buying existing government bonds on the open market (or, more likely, directly from banks). Whether they buy the bonds from an individual or the bank doesn't really affect the model because the assumption is that the individual would deposit the proceeds from the sale into a bank, so no matter what the money ends up in bank where it will multiply due to fractional reserve banking.

[@teekastian]

@@jaytweet9494 thanks! clear!

[@bighands69]

Most of the money is not available to the market. Politics and government is very poor at actually managing things. So when you see a headline figure as a sort of dumb rule you could almost divide it by 10 in terms of the true market effect. The real danger of QE is not inflation it is the retardation of long term economic growth.

[@teomaky]

ty

[@zhongrui5144]

Pardon me for asking. Why does the Fed need multiple "private bank" accounts? Why not just one? What is the whole purpose?

[@masoodsattari2]

Who owns the security the central bank purchased in step 1?

[@Jordanfo79]

What about the 3 dollars that the system creates out of thin air? I assume that it is for making the money circulate more easily, but the question is: What backs up these 3 extra dollars from M2, as the 4 dollars from the central Bank had securities that backed them up?

[@mlovmo]

That's just it: It's created out of thin air. Makes you have solid confidence in the system, doesn't it? Yikes..

[@theyluvloki]

And now the required reserve banks are allowed to have is 0...

[@semkjaer3581]

I'm pretty sure the banks can lend much more than 90% in the Netherlands it's around 96%

[@kingtigercrownestate9102]

Money usually goes from a central bank to the next bank first and THEN to individuals and businesses as needed NOT directly to an individual from a central bank. That example seems a bit incorrect.

[@SequelFinalNight]

So what your saying in the video is that QE3 promise of $40 billion a month is more like $70 billion when it gets into our economy using M1 money supply. Very interesting... thanks for helping to figure out screwed our dollar has become from the FEDS. God bless America!!!

[@bighands69]

No. The number $40 billion is just a headline number and not the real amount of transfer. Most of the US debt is not cash based and is long term debt that is really liabilities. So when they say $40 billion it could be a direct transfer of $2 billion or $20 billion but would never be the full amount. When it comes to interest payments on the QE about that is created they can defer and even roll it back into the original creation amount.

[@BoloSrewu]

watch

[@reagoli8895]

something i can watch the night b4 my exam and end up with a better score, AWWW YEAHHHH~~~

[@theepicsealshow123]

Did you get a better score?

[@Ratracer_222]

@@theepicsealshow123 no he failed!

[@nortonvandepoele2359]

Full reserve banking would eliminate bank runs

[@omgiheartpie]

Wow.

[@vivekmshl]

I had a question, who creates the security in the first place for the central bank to purchase?

[@qmance8062]

the central bank does, it sells them when it needs money and buys them back when it wants to pump money into the system. I guess, idk.

[@itscarl0zyall1]

Are you counting debt cards as checks as well?

[@jamesbowman1767]

How can i find out what the money supply was in 1971?

[@nagasako7]

RIP US Economy

[@amanvds]

Hummmm ..... Nice explanation with good graphic representation

[@aarontuplin]

Really digging Ari Shaffir's voice over lol

[@Shawn9081]

What is the benefit to PB#1 of giving the 1$ in savings to another PB(#2)?

[@crptc5707]

I don't get it, why central bank buys government bond instead of directly lending money to commercial banks?

[@bradleycarr91]

I don't understand why M1 or M2 are ever more than M0 because not more than one person can have any of those $4 originally "printed". It just feels like for M1 and M2 we're just double-counting dollars...can someone help me out here? Is the nature of lending the missing part of the equation, and if so, the banks cannot lend more than the money they have, which still makes me think there's double-counting.

[@bighands69]

Welcome to the world of government finance. It is a bureaucracy that is slow and not good at getting things done. You will find that the whole system is full of repeats and overlapping just for the sake of it. Now there is value in the different stages of the money cycle and there is lots of baggage as well.

[@musak.4068]

Because we have a fractional reserve system where "money" is multiplied.

[@kirthiganair2554]

Does security mean bonds and stocks?

[@Zeus-7778]

yes

[@masoodsattari2]

Can you make a video about M3? It seems like a big part of the money supply: upload.wikimedia.org/wikipedia/commons/thumb/9/95/Components_of_the_United_States_money_supply2.svg/1280px-Components_of_the_United_States_money_supply2.svg.png

[@christopheb9221]

the fed stopped recording the m3 in 2006. my guess is they knew about the MBSs/CDOs/CDS subprime scam and prob more that we dont know about(its amazing how many banks do illegal things esp with manipulating markets/prices). they were going to have to inflate the money supply by alot and needed to move things around and not make it public causing panic and realization of inflation and make the dollar worthless. (fractional reserve lending makes no sense you should not be able to lose money when you can create it)with computers the banks must have a much better grip on money supply and the economy in general. But they say otherwise and use the MZM: _On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release. Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks). M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits._

[@lazarpavlovic1892]

m3 money, other than m2, includes all the deposits and lets say bills from non-banks institutions, simplified: m2 and all other money no matter where the money is... thats why goverment doesnt wanna deal with it, there could be million types of manipulation with that money, maybe example can be money laundering, idk, i am trying to learn too XD

[@trilify8385]

What are securities?

[@thomasnega1868]

Stocks and Bond

[@khano1414]

So that means Central Bank buys things with the money that they can print without doing anything. How exactly?

[@beesleyrc759]

You live in a corrupt world my friend.

[@PerennialWheat]

Fiat currency. We used to be on a gold standard where gold can be exchanged for usd which means if the fed wanted to create more money they had to get equal value in gold. Way better system imo. (applies to USA).

[@jorgegomez524]

m=f, from fake. “Only Gold is money, everything is else is credit. JP Morgan

[@erikaahlstrom6543]

This does ot explain the difference between the M0 and the amount of cash usd around the world. the M0 in 2005 was 800 billion but there is 1.35 paper money in total. it does not explain the difference between these two

[@aimuser3111]

+ERIKA AHLSTRÖM The paper money in circulation is nominal so it just a raw count. M0 is measured in Real GDP terms so what actual dollar value can buy you when compared to the base year.

[@theresahall3029]

ERIKA AHLSTRÖM gjghhgggg

[@theresahall3029]

ERIKA AHLSTRÖM jxb how do you make

[@Yurick052]

3 checks ... 1st check: zero dollars and 50/99 =0.505;. Second Check: zero dollars and 50/100 = 0.50. Third Check: zero dollars and 50/101 = 0.495. The banks have to honor this right?

[@jmalvika]

wt are u saying at 0:48? pezzz dispensers? wzatt?

[@51MontyPython]

You've never heard of Pez dispensers? Where are you from?

[@bodhibunker521]

What is the best english search engine in the world?

[@theepicsealshow123]

Stick to Yahoo

[@bargdaffy1535]

Let me guess, M3 is Rich People Money, Real Estate and Art and Collectibles.

[@musak.4068]

No, M3 = M2 + Money Market Funds.

[@ChooseAname495]

So it seems the security that the central bank bought from the private bank is pretty valuable. How did the private bank come into possession of this security? Who did they buy it from? Or did they (private bank) create this security to begin with? and why couldn't just the private bank use the value of that security to divide it up into checking and savings accounts and lend it out themselves without having to sell it to a central bank? It seems the real creators of money is private bank right?

[@svenkateswaran7516]

Racism IS a Disease exactly... the Treasury has to auction off the securities. Fed credits the private banks to buy these securities, only to buy them back as part of QE. But the money supply keeps growing additionally through interbank lending, charging interest on money the banks don’t have. These notes are out of reach from the Fed. As a private bank, you keep writing checks in perpetuity while keeping the minimum fractional reserve mandated, meaning that money creation unlimited more or less; limited only by the number of financial institutions participating in the system.

[@AlfSka11]

hey you should apply for youtube partnership if you haven't already, that way you get paid a good amount of money by teaching :D

[@tanshikohli6730]

what si pez dipensers

[@Hellomothersauce]

+Tanshi kohli its just a candy brand

[@iPhone3GSCase]

Noice

[@camfunme]

Cheques....

[@OmarMahmoudov]

lol

[@parteibonza]

this is USA. we spell it CHECKS

[@davidbowers4707]

lol...

[@se7ensnakes]

All this is absolute nonsense. very confusing at that.

[@bigguy7265123]

NO! Then that means advertisements! How could a fellow youtube user wish that?!?! lol

[@mrindia1]

Does this guy know everything or what?

[@tkkt3605]

Very confusing and bunch a nonsense. On a 1 to 10 reserve ratio banks can lend nine dollars for ever $1 they hold in reserves (deposits). The $reserve depends upon their total depositors. Depositors lend money to banks. Physical cash equates $1 to $1 bank reserves which is withdraw from a local bank. The central bank only ensures that banks cash other banks checks.

[@walperstyle]

Welcome to what those crazy Libertarians were trying to warn of. ...but hey, if you are not too late, you can join us on our private islands, there is still time to get into Cryptocurrency and adapt Mises/Hayek into your life.

[@a1cswiz1611]

So M1 is an illusion?

[@wananewcom3026]

Haha yes. But scary if u think abt it, most of the money we held are illusions. Iirc 97% of 'money' are in either M1 or 2

[@MrAmbrosse]

You could have explained it much more concisely in a couple of minutes.