Recently, I saw a graph of the projected M3 money supply (projected because the government no longer publishes the M3). It showed that the M3 has plummeted over the past few years. What does that mean, exactly? I don’t think I quite understand what the M3 even is. Can anyone explain?
M1 represents all physical currency and the amount in demand (checking) accounts
M2: M1 + savings accounts, money market accounts, retail money market mutual funds, and CD’s under $100,000
M3: M1+M2+ other CDs (large time deposits and institutional money market mutual funds), eurodollar deposits (offshore deposits) and repurchase agreements.
As far as why M3 has dropped? I do not know. Perhaps someone else may have an answer. I did a quick google search but nothing substantial came up.
As part of M3 (directly or indirectly) is the power derivatives and SPV instruments have on Banks balance sheets which…when business get so bad affects their ability to lend, invest and obtain cash.
I am no expert on the matter but it lies more in the power indirect influence derivatives have on M3.