Don't Blame The Fed

Generali

CLAPTON wrote: »

In economics, the money supply or money stock, is the total amount of money available in an economy at a particular point in time.[1] There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits (depositors' easily-accessed assets on the books of financial institutions



What Is the Money Supply?

The U.S. money supply comprises currency—dollar bills and coins issued by the Federal Reserve System and the U.S. Treasury—and various kinds of deposits held by the public at commercial banks and other depository institutions such as thrifts and credit unions. On June 30, 2004, the money supply, measured as the sum of currency and checking account deposits, totaled $1,333 billion. Including some types of savings deposits, the money supply totaled $6,275 billion. An even broader measure totaled $9,275 billion.
These measures correspond to three definitions of money that the Federal Reserve uses: M1, a narrow measure of money’s function as a medium of exchange; M2, a broader measure that also reflects money’s function as a store of value; and M3, a still broader measure that covers items that many regard as close substitutes for money.




money supply






Definition

The total supply of money in circulation in a given country's economy at a given time. There are several measures for the money supply, such as M1, M2, and M3. The money supply is considered an important instrument for controlling inflation by those economists who say that growth in money supply will only lead to inflation if money demand is stable. In order to control the money supply, regulators have to decide which particular measure of the money supply to target. The broader the targeted measure, the more difficult it will be to control that particular target. However, targeting an unsuitable narrow money supply measure may lead to a situation where the total money supply in the country is not adequately controlled.


Read more: http://www.investorwords.com/3110/money_supply.html#ixzz1HUcRWMCg

The key word in the above is 'circulation'. The rate of circulation is the velocity of money. To remove it from the money supply is to look at half the picture.

John_Pierpoint

So your initial posting is in support of the "limits to growth" thesis?
[World population.........shortage........peak oil.......climate change...........9 billion.........my brain hurts]

It appears we have got both ends of the equation creating "the perfect storm" - Some parts of the world are facing a decline in natural resources and other regimes are facing the fear of mass unemployment; some are facing both.

There are some worried governments; the most worried governments must be those with economies built on unsustainable foundations, faced with having to double their jobs on offer every 25 to 35 years (3% - 2% population growth rate). Traditionally the surplus people created by human fertility were illiterate, uncounted, dispensable and they died in their poverty - they were "a problem" insofar as they took to petty crime but "the mob" did not give government leaders sleepless nights.

Do we now have failing states with high population growth but these match the traditional model, so up to now do not represent a serious threat.

The immediate threat is from the states with a high but falling GDP per head, where the young population is still reasonably healthy and educated. As they face a declining unsustainable economy they realise they face a future of relative poverty when compare with their parents generation. The government administering this declining GDP per head, will try to buy off their unemployment by stoking up the fiscal deficit and printing money. The bread and circuses solution that created the dark ages from the Roman empire.

So let us now look at the states with high population growth; unfortunately there is no agreement on which they are:
http://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate

As the United Nations is in the business of foreign aid and one country one vote and is probably giving more weight to the birth rate than the death rate, I will use Uncle Sam's list:

There are 62 nations with the need to double jobs in less than 35 years given their population growth rate:

3.7% UAE
3.7% Burundi
,
,
,
2.0% Nigeria
2.0% Honduras

So let us eliminate the pastoral dirt poor countries from the list (GDP per head < $1.5K) and the tiny countries that are being spawned at the United Nations (Population < million). That eliminates 42 countries from the list, mostly in Africa or small islands (Democratic Congo & Cayman Islands for example)
So we have a list of 20 countries facing an unsustainable future but with enough wealth for their citizens to be educated or capable of educating themselves via the internet:
UAE
Kuwait.
Gaza
Oman
Yemen
Congo (The French legacy)
Iraq
Paraguay
Jordan
West Bank
Libya
Sudan
Angola
Papua New Guinea
Guatemala
Egypt
Syria
Nigeria
Honduras


Of this top 20 (Well it is 19 as there are no reliable statistics for Somalia and its diaspora probably dirt poor pirates)
12 are Muslim countries
13 are oil producers.

So we now have a list of 20 countries with a population rich enough for internet access, .
A significant number of these are dependent on oil (rather than manufacturing ) and have a powerful religion influencing its unemployed.
As oil production declines while population doubles this list makes a reference for current and future inflation & strife.

Just for the record the UK has a stagnant GDP per head, a balance of payments problem with declining oil exports and a doubling of population in 150 years.