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But M2 is growing at the same rate as M3. The important feature is that M1 is flat, and is a decreasing share of the money supply. Looking at what constitutes M2, other than savings accounts, only the relatively wealthy can afford to park their money in time deposits, let alone money-market accounts which have rather high minimum balances (in the tens of thousands of dollars). And in the US currently people are more likely to have a credit than a savings account. You have to have a lot of cash to have a sizeable balance on your savings account.

So the ratio of M3 (or M2) to M1 is a measure of wealth inequality, and that has been getting steadily worse since 1960's, except for the Johnson and Clinton Presidencies.

We have met the enemy, and it is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Oct 7th, 2007 at 05:21:01 PM EST
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