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M4 Broad Money Explanation?

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could one of you very learned people give me an explanation of M4. I'm aware is the overall money supply in the economy. But what are it's effects on inflation etc...

What's good and what's bad when I look the bank of England M4 graph?

I like to have a full understanding off things and can't seem to find a good explanation of this researching online.

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could one of you very learned people give me an explanation of M4. I'm aware is the overall money supply in the economy. But what are it's effects on inflation etc...

What's good and what's bad when I look the bank of England M4 graph?

I like to have a full understanding off things and can't seem to find a good explanation of this researching online.

there are many variations of M4.

One poster likes the M4 variation which excludes balances and creations between financial institutions. I prefer this too, but the one that includes this chows that money supply was increasing for years at about 14%.....this is where the credit bubble lies in the shadow banking system, which the PsTB thought wouldnt affect the real economy....I tend to agree, but, this bubble is the one that the QE is designed to fix....and of course, QE IS in the real economy.

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could one of you very learned people give me an explanation of M4. I'm aware is the overall money supply in the economy. But what are it's effects on inflation etc...

What's good and what's bad when I look the bank of England M4 graph?

I like to have a full understanding off things and can't seem to find a good explanation of this researching online.

If M4 expands with the growth in good and services, in theory, inflation will not happen. However, 60% of M4 growth can be attributed to mortgages, banks creating money against the same old crumbling piles and limited supply of cardboard new builds. Banks don't call this creating money from thin air because their book balance, the fact that the nominal value of a property rising 20% pa is purely a function of money creation against hard assets seems to escape them.

Now, when you have lots of people taking on debt they are accepting bank credit as real money. The total amount of debt expands which means the total amount of money circulating expands. This new "money" causes trouble, it gets into the hands of speculators who drive up the price of things on whim - hence $144 oil - there's your inflation.

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could one of you very learned people give me an explanation of M4. I'm aware is the overall money supply in the economy. But what are it's effects on inflation etc...

What's good and what's bad when I look the bank of England M4 graph?

I like to have a full understanding off things and can't seem to find a good explanation of this researching online.

:lol:

While I'm probably not a 'learned' person, I've spent a few years trying to get my head around all this stuff, and - the best I can tell you is that no-one really knows, but there are a lot of opinions.

I found that the BoE 'Explanatory Note' gave the best information about what, exactly, M4 is. You can look up the many M4 variants in their statistical database, and these - too - come with helpful notes.

http://www.bankofengland.co.uk/mfsd/iadb/notesiadb/M4.htm

Actually, while I thought I was just posting a 'basic reply' - I'd like to draw everyone else's attention to the last paragraph (which wasn't there last time I visited the page.)

Securitisations Reporting

From January 2010 data onwards, all loans that have been securitised by MFIs will be included on the institutions’ balance sheet for statistical reporting purposes. Some institutions reported securitisations on balance sheet prior to 2010, so their reporting did not change. However, other institutions brought back on to their balance sheets loans that had been securitised in the past. When these loans came back on balance sheet, an additional liability to the SPV was also brought on balance sheet, to balance out the increase in loans. This caused a level shift in various series in January 2010, as well as changing the coverage of various series from January 2010 data onwards. For more details, please see the February 2010 Monetary and Financial Statistics article “Statistical Reporting of Securitisations”by Jennifer Owladi.

In my opinion, this change in the reporting mechanism really does render M4 figures useless for estimating what matters about monetary expansion for early 2010. I guess this sort of quirk is exactly what I mean by no-one really knowing what M4 means in practical terms. We can give a specification for how the figures were collected, but there is no long-term consistency to give context to the figures.

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M4 Holdings: The money you have in your bank account / term deposits etc - and the cash in your pocket. Bank credit + physical cash. Physical cash is also given measured under M0. This is the money supply - monetary liabilities of the commercial banking system.

M4 Lending: this is the measurement of lending into the M4 sector. Consumer credit - i.e. credit the consumer has extended to the banking system. Loan agreements etc.

M4 Lending is not money in the everyday sense - it's a measurement of banking assets. The anti-money supply. Once you extend credit to the bank - they extend it to you - so both measures increase.

M4 is also apparently a measurement of fraud ;)

Edited by Alan B'Stard MP

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Basically, the key issue they are trying to get over is the fact they haven't been counting all the money in the economy. They'll take a long time to get to where they want whereby they have visibility and what it is reporting makes sense.

I remember those discussions. :)

I was surprised not that securitised lending is now coming onto balance sheets (as it should always have been) but that M4 has become a policy tracking tool more than a useful statistic about money supply. While we can agree that M4's value was massively diminished by not counting securitised debt, it still had some purpose as a general bellwether for credit availability... the logic being that a proportion of any money borrowed and spent would be kept in forms that would impact M4.

What we really need is two data series - one for the old rules, one for the new rules. Each should stretch back for many years (preferably decades) into the past. That way, the statistics can at least identify recent trends. Instead we get a broken series with huge jumps and arbitrary choices as to what is or is not included in past figures.

I guess the (simple) point I was trying to make is that M4 will have risen significantly recently - but this might have happened while (what matters about) money supply contracted abruptly.

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M4 Holdings: The money you have in your bank account / term deposits etc - and the cash in your pocket. Bank credit + physical cash. Physical cash is also given measured under M0. This is the money supply - monetary liabilities of the commercial banking system.

M4 Lending: this is the measurement of lending into the M4 sector. Consumer credit - i.e. credit the consumer has extended to the banking system. Loan agreements etc.

M4 Lending is not money in the everyday sense - it's a measurement of banking assets. The anti-money supply. Once you extend credit to the bank - they extend it to you - so both measures increase.

M4 is also apparently a measurement of fraud ;)

Alan remembered the words.

Bless.

Bank/other financial institution pretends to lend money which it doesn't really have and writes it down. That is broad money.

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M4 Holdings: The money you have in your bank account / term deposits etc - and the cash in your pocket. Bank credit + physical cash. Physical cash is also given measured under M0. This is the money supply - monetary liabilities of the commercial banking system.

M4 Lending: this is the measurement of lending into the M4 sector. Consumer credit - i.e. credit the consumer has extended to the banking system. Loan agreements etc.

M4 Lending is not money in the everyday sense - it's a measurement of banking assets. The anti-money supply. Once you extend credit to the bank - they extend it to you - so both measures increase.

M4 is also apparently a measurement of fraud ;)

Our father, who art in heaven.....

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  • 142 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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