[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.50,0:00:02.12,Default,,0000,0000,0000,,What I want to explore\Nin this video is
Dialogue: 0,0:00:02.12,0:00:04.56,Default,,0000,0000,0000,,the different ways of\Nmeasuring the amount of money
Dialogue: 0,0:00:04.56,0:00:06.73,Default,,0000,0000,0000,,we have in circulation.
Dialogue: 0,0:00:06.73,0:00:09.19,Default,,0000,0000,0000,,So we're going to start\Nthings with our Central
Dialogue: 0,0:00:09.19,0:00:10.63,Default,,0000,0000,0000,,Bank in the US.
Dialogue: 0,0:00:10.63,0:00:13.36,Default,,0000,0000,0000,,This would be the\NUS Federal Reserve.
Dialogue: 0,0:00:13.36,0:00:17.34,Default,,0000,0000,0000,,And let's say that\Nthey print $4.
Dialogue: 0,0:00:17.34,0:00:19.83,Default,,0000,0000,0000,,And we're going to focus, just\Nfor visualization purposes,
Dialogue: 0,0:00:19.83,0:00:21.40,Default,,0000,0000,0000,,on that they're\Ndoing it physically.
Dialogue: 0,0:00:21.40,0:00:23.24,Default,,0000,0000,0000,,They could also do\Nit electronically.
Dialogue: 0,0:00:23.24,0:00:25.16,Default,,0000,0000,0000,,But we're just going to\Nfocus on the physical.
Dialogue: 0,0:00:25.16,0:00:27.12,Default,,0000,0000,0000,,And the way that they\Nget this into circulation
Dialogue: 0,0:00:27.12,0:00:29.10,Default,,0000,0000,0000,,is it they'll take\Nthese $4 and they'll
Dialogue: 0,0:00:29.10,0:00:32.24,Default,,0000,0000,0000,,go buy securities in the\Nopen market, normally
Dialogue: 0,0:00:32.24,0:00:34.31,Default,,0000,0000,0000,,very safe and very\Nliquid securities.
Dialogue: 0,0:00:34.31,0:00:36.54,Default,,0000,0000,0000,,Liquid means it's very\Neasy to buy and sell
Dialogue: 0,0:00:36.54,0:00:38.50,Default,,0000,0000,0000,,those securities in\Nlarge quantities.
Dialogue: 0,0:00:38.50,0:00:40.05,Default,,0000,0000,0000,,For example,\Ngovernment treasuries
Dialogue: 0,0:00:40.05,0:00:43.88,Default,,0000,0000,0000,,is a liquid security,\Nor liquid asset.
Dialogue: 0,0:00:43.88,0:00:45.76,Default,,0000,0000,0000,,PEZ dispensers would\Nnot be a liquid asset.
Dialogue: 0,0:00:45.76,0:00:47.51,Default,,0000,0000,0000,,If I bought a billion\Ndollars worth of PEZ
Dialogue: 0,0:00:47.51,0:00:49.78,Default,,0000,0000,0000,,dispensers it would be very\Nhard for me to sell-- one
Dialogue: 0,0:00:49.78,0:00:51.96,Default,,0000,0000,0000,,it would be very hard for me\Nto buy a billion dollars worth.
Dialogue: 0,0:00:51.96,0:00:53.67,Default,,0000,0000,0000,,And it would be even\Nprobably even harder
Dialogue: 0,0:00:53.67,0:00:57.06,Default,,0000,0000,0000,,for me to sell a billion dollars\Nworth in any short or medium
Dialogue: 0,0:00:57.06,0:00:58.04,Default,,0000,0000,0000,,timeframe.
Dialogue: 0,0:00:58.04,0:01:00.50,Default,,0000,0000,0000,,So the Central Bank goes out,\Nand let's say they go and buy
Dialogue: 0,0:01:00.50,0:01:03.21,Default,,0000,0000,0000,,one liquid security for $4.
Dialogue: 0,0:01:03.21,0:01:05.30,Default,,0000,0000,0000,,So this is a security\Nright over here.
Dialogue: 0,0:01:05.30,0:01:07.51,Default,,0000,0000,0000,,And the person that they\Nbought the security from
Dialogue: 0,0:01:07.51,0:01:09.15,Default,,0000,0000,0000,,decides to deposit it in a bank.
Dialogue: 0,0:01:09.15,0:01:11.11,Default,,0000,0000,0000,,They could either directly\Ndeposit it in a bank
Dialogue: 0,0:01:11.11,0:01:12.63,Default,,0000,0000,0000,,or they could use\Nthat money that they
Dialogue: 0,0:01:12.63,0:01:14.60,Default,,0000,0000,0000,,got from selling their\Nsecurity to buy things,
Dialogue: 0,0:01:14.60,0:01:16.18,Default,,0000,0000,0000,,and the person they\Nbought things from
Dialogue: 0,0:01:16.18,0:01:17.33,Default,,0000,0000,0000,,could deposit it in a bank.
Dialogue: 0,0:01:17.33,0:01:19.37,Default,,0000,0000,0000,,But one way or another we\Ncan imagine it all gets
Dialogue: 0,0:01:19.37,0:01:21.05,Default,,0000,0000,0000,,deposited in a bank.
Dialogue: 0,0:01:21.05,0:01:22.81,Default,,0000,0000,0000,,So this is our private bank.
Dialogue: 0,0:01:22.81,0:01:26.90,Default,,0000,0000,0000,,I'll call this private\Nbank number one.
Dialogue: 0,0:01:26.90,0:01:30.76,Default,,0000,0000,0000,,So now all of these\Ndollars are transferred
Dialogue: 0,0:01:30.76,0:01:34.96,Default,,0000,0000,0000,,to private bank number one.
Dialogue: 0,0:01:34.96,0:01:38.04,Default,,0000,0000,0000,,And they are no longer--\Nthe Federal Reserve,
Dialogue: 0,0:01:38.04,0:01:40.25,Default,,0000,0000,0000,,or the Central Bank,\Nin the general case,
Dialogue: 0,0:01:40.25,0:01:42.38,Default,,0000,0000,0000,,is no longer in\Npossession of them.
Dialogue: 0,0:01:42.38,0:01:44.11,Default,,0000,0000,0000,,They've been transferred\Nright over here.
Dialogue: 0,0:01:44.11,0:01:45.53,Default,,0000,0000,0000,,And I want to cross\Nthese out just
Dialogue: 0,0:01:45.53,0:01:48.54,Default,,0000,0000,0000,,so we can keep track of things.
Dialogue: 0,0:01:48.54,0:01:51.67,Default,,0000,0000,0000,,Now when they deposit it\Nin private bank number one,
Dialogue: 0,0:01:51.67,0:01:55.00,Default,,0000,0000,0000,,they said, well, I need three\Nof these dollars on demand.
Dialogue: 0,0:01:55.00,0:01:56.88,Default,,0000,0000,0000,,And I want to write\Nchecks against them.
Dialogue: 0,0:01:56.88,0:02:00.98,Default,,0000,0000,0000,,So they put three of these\Ndollars in a checking account.
Dialogue: 0,0:02:00.98,0:02:03.27,Default,,0000,0000,0000,,There are at three of these\Ndollars a checking account.
Dialogue: 0,0:02:03.27,0:02:13.39,Default,,0000,0000,0000,,So checks up too-- so\Nwrite checks up to $3.
Dialogue: 0,0:02:13.39,0:02:15.49,Default,,0000,0000,0000,,And so they can get a\Nlittle bit more interest,
Dialogue: 0,0:02:15.49,0:02:17.09,Default,,0000,0000,0000,,and the bank's willing to give\Na little bit more interest
Dialogue: 0,0:02:17.09,0:02:18.92,Default,,0000,0000,0000,,on a savings account\Nbecause they don't have
Dialogue: 0,0:02:18.92,0:02:22.53,Default,,0000,0000,0000,,to keep the reserves, they\Nput $1 into a savings account.
Dialogue: 0,0:02:25.21,0:02:27.63,Default,,0000,0000,0000,,And they cannot write checks\Nagainst that savings account.
Dialogue: 0,0:02:27.63,0:02:29.30,Default,,0000,0000,0000,,Now there are special\Ncircumstances now,
Dialogue: 0,0:02:29.30,0:02:32.38,Default,,0000,0000,0000,,but for simplicity, let's just\Nsay that they cannot write
Dialogue: 0,0:02:32.38,0:02:32.88,Default,,0000,0000,0000,,checks.
Dialogue: 0,0:02:32.88,0:02:34.92,Default,,0000,0000,0000,,There are some that have\Nrestricted check writing
Dialogue: 0,0:02:34.92,0:02:36.20,Default,,0000,0000,0000,,and things like that now.
Dialogue: 0,0:02:36.20,0:02:38.92,Default,,0000,0000,0000,,So this bank says, OK,\Nwell, this dollar, I
Dialogue: 0,0:02:38.92,0:02:40.92,Default,,0000,0000,0000,,don't have to even have\Nany reserves against it.
Dialogue: 0,0:02:40.92,0:02:42.13,Default,,0000,0000,0000,,I could loan out this dollar.
Dialogue: 0,0:02:42.13,0:02:43.68,Default,,0000,0000,0000,,And the person they\Nlend it to, let's
Dialogue: 0,0:02:43.68,0:02:47.13,Default,,0000,0000,0000,,say that they immediately go and\Ndeposit it into another bank.
Dialogue: 0,0:02:47.13,0:02:50.83,Default,,0000,0000,0000,,So they immediately go and\Ndeposit this in private bank,
Dialogue: 0,0:02:50.83,0:02:52.55,Default,,0000,0000,0000,,I'll call this private bank two.
Dialogue: 0,0:02:52.55,0:02:54.92,Default,,0000,0000,0000,,So it's no longer\Nin private bank one.
Dialogue: 0,0:02:54.92,0:02:57.12,Default,,0000,0000,0000,,Let me draw a private bank two.
Dialogue: 0,0:02:57.12,0:03:00.88,Default,,0000,0000,0000,,Private bank two is\Na right over here.
Dialogue: 0,0:03:00.88,0:03:04.69,Default,,0000,0000,0000,,Private bank number two.
Dialogue: 0,0:03:04.69,0:03:07.47,Default,,0000,0000,0000,,And they deposit it\Ninto a savings account
Dialogue: 0,0:03:07.47,0:03:10.54,Default,,0000,0000,0000,,in private bank number two.
Dialogue: 0,0:03:10.54,0:03:12.71,Default,,0000,0000,0000,,And let's say all of\Nthis, out of all of this,
Dialogue: 0,0:03:12.71,0:03:15.46,Default,,0000,0000,0000,,the bank says, well,\Nthis is a demand deposit,
Dialogue: 0,0:03:15.46,0:03:16.96,Default,,0000,0000,0000,,I have to keep some reserves.
Dialogue: 0,0:03:16.96,0:03:18.64,Default,,0000,0000,0000,,This is a fractional\Nreserve system.
Dialogue: 0,0:03:18.64,0:03:21.67,Default,,0000,0000,0000,,But I can lend out, in the\NUS, I could lend out up to 90%
Dialogue: 0,0:03:21.67,0:03:22.27,Default,,0000,0000,0000,,of this.
Dialogue: 0,0:03:22.27,0:03:24.00,Default,,0000,0000,0000,,And maybe this bank is a\Nlittle bit more conservative,
Dialogue: 0,0:03:24.00,0:03:25.68,Default,,0000,0000,0000,,They only lend out 2/3 of this.
Dialogue: 0,0:03:25.68,0:03:27.74,Default,,0000,0000,0000,,So they lend out\N$2 out of these $3
Dialogue: 0,0:03:27.74,0:03:29.57,Default,,0000,0000,0000,,And let's say the person\Nthey let it do also
Dialogue: 0,0:03:29.57,0:03:31.91,Default,,0000,0000,0000,,happens to deposit it\Nin private bank number
Dialogue: 0,0:03:31.91,0:03:33.70,Default,,0000,0000,0000,,two, just coincidentally.
Dialogue: 0,0:03:33.70,0:03:40.06,Default,,0000,0000,0000,,So these two also end up\Nin private bank number two.
Dialogue: 0,0:03:40.06,0:03:45.25,Default,,0000,0000,0000,,And so they're no longer\Nin private bank number
Dialogue: 0,0:03:45.25,0:03:48.76,Default,,0000,0000,0000,,one, although this person could\Nstill write checks up to $3.
Dialogue: 0,0:03:48.76,0:03:50.42,Default,,0000,0000,0000,,And now here in\Nprivate bank number
Dialogue: 0,0:03:50.42,0:03:52.04,Default,,0000,0000,0000,,two-- and let's say\Nthese are deposited
Dialogue: 0,0:03:52.04,0:03:53.59,Default,,0000,0000,0000,,in a checking account.
Dialogue: 0,0:03:53.59,0:03:58.26,Default,,0000,0000,0000,,These are deposited right over\Nhere in a checking account.
Dialogue: 0,0:03:58.26,0:04:00.91,Default,,0000,0000,0000,,Now private bank number two,\Nit can do a couple of things.
Dialogue: 0,0:04:00.91,0:04:03.16,Default,,0000,0000,0000,,In this checking account it\Nhas to keep some reserves.
Dialogue: 0,0:04:03.16,0:04:04.31,Default,,0000,0000,0000,,Let's say it's even\Nmore conservative.
Dialogue: 0,0:04:04.31,0:04:06.02,Default,,0000,0000,0000,,It only decides to\Nlend out half of this,
Dialogue: 0,0:04:06.02,0:04:08.28,Default,,0000,0000,0000,,even though it\Ncould lend out 90%.
Dialogue: 0,0:04:08.28,0:04:11.26,Default,,0000,0000,0000,,And so it lends out\None of these dollars.
Dialogue: 0,0:04:11.26,0:04:13.68,Default,,0000,0000,0000,,And the person that they lend\Nit to just takes that dollar
Dialogue: 0,0:04:13.68,0:04:15.86,Default,,0000,0000,0000,,and they put it in their wallet.
Dialogue: 0,0:04:15.86,0:04:17.36,Default,,0000,0000,0000,,So they just put\Nit in their wallet.
Dialogue: 0,0:04:17.36,0:04:19.59,Default,,0000,0000,0000,,And they could also lend\Nout this entire savings.
Dialogue: 0,0:04:19.59,0:04:21.01,Default,,0000,0000,0000,,And let's just say\Nthat the person
Dialogue: 0,0:04:21.01,0:04:24.37,Default,,0000,0000,0000,,that they lend that\N$1 in savings to also
Dialogue: 0,0:04:24.37,0:04:25.37,Default,,0000,0000,0000,,puts it in their wallet.
Dialogue: 0,0:04:28.37,0:04:30.79,Default,,0000,0000,0000,,And notice, the original\N$4 are still there.
Dialogue: 0,0:04:30.79,0:04:32.89,Default,,0000,0000,0000,,One, two, three, four.
Dialogue: 0,0:04:32.89,0:04:35.87,Default,,0000,0000,0000,,Now, and just to be clear,\Nthis person right over here can
Dialogue: 0,0:04:35.87,0:04:37.42,Default,,0000,0000,0000,,write checks up to $3 .
Dialogue: 0,0:04:37.42,0:04:39.29,Default,,0000,0000,0000,,And this person\Nright over here can
Dialogue: 0,0:04:39.29,0:04:43.77,Default,,0000,0000,0000,,write checks-- let me do\Nthat same checking account
Dialogue: 0,0:04:43.77,0:04:53.35,Default,,0000,0000,0000,,color-- they can\Nwrite checks up to $2.
Dialogue: 0,0:04:53.35,0:04:55.78,Default,,0000,0000,0000,,Now let's think about the\Ndifferent forms of money
Dialogue: 0,0:04:55.78,0:04:56.77,Default,,0000,0000,0000,,there are here.
Dialogue: 0,0:04:56.77,0:04:59.50,Default,,0000,0000,0000,,Well, we could think of money in\Na very, very narrow way, which
Dialogue: 0,0:04:59.50,0:05:03.20,Default,,0000,0000,0000,,is just what did the Central\NBank print, or create
Dialogue: 0,0:05:03.20,0:05:07.21,Default,,0000,0000,0000,,electronically as electronic\Nreserves of its member banks?
Dialogue: 0,0:05:07.21,0:05:08.71,Default,,0000,0000,0000,,But for simplicity\Nhere you can just
Dialogue: 0,0:05:08.71,0:05:11.06,Default,,0000,0000,0000,,think about the physical\Ncurrency that it printed,
Dialogue: 0,0:05:11.06,0:05:12.61,Default,,0000,0000,0000,,its base money.
Dialogue: 0,0:05:12.61,0:05:17.41,Default,,0000,0000,0000,,And so that, often, is just\Nreferred to as base money.
Dialogue: 0,0:05:17.41,0:05:19.37,Default,,0000,0000,0000,,And in the US and\Nother countries
Dialogue: 0,0:05:19.37,0:05:21.31,Default,,0000,0000,0000,,it's often the same thing as M0.
Dialogue: 0,0:05:21.31,0:05:23.64,Default,,0000,0000,0000,,There's slight differences\Nfrom country to country.
Dialogue: 0,0:05:23.64,0:05:26.56,Default,,0000,0000,0000,,And in this example, as soon\Nas they printed it and put it
Dialogue: 0,0:05:26.56,0:05:29.09,Default,,0000,0000,0000,,into circulation, that was $4.
Dialogue: 0,0:05:29.09,0:05:31.46,Default,,0000,0000,0000,,We had $4 of base money.
Dialogue: 0,0:05:31.46,0:05:33.77,Default,,0000,0000,0000,,And that's obvious because\Nas soon as they printed this
Dialogue: 0,0:05:33.77,0:05:35.31,Default,,0000,0000,0000,,and they bought the\Nsecurity with it,
Dialogue: 0,0:05:35.31,0:05:38.61,Default,,0000,0000,0000,,and it was in circulation, that\N$4 could be used to buy things.
Dialogue: 0,0:05:38.61,0:05:41.77,Default,,0000,0000,0000,,It could be used to\Nfacilitate transactions.
Dialogue: 0,0:05:41.77,0:05:44.05,Default,,0000,0000,0000,,Now that clearly isn't\Nall of the stuff that
Dialogue: 0,0:05:44.05,0:05:47.46,Default,,0000,0000,0000,,can be used as money in this\Nlittle universe we created.
Dialogue: 0,0:05:47.46,0:05:50.13,Default,,0000,0000,0000,,This guy, you have the\N$4 but these people
Dialogue: 0,0:05:50.13,0:05:52.54,Default,,0000,0000,0000,,can also write checks\Nright over here.
Dialogue: 0,0:05:52.54,0:05:55.36,Default,,0000,0000,0000,,And so we can have a slightly\Nbroader definition of money.
Dialogue: 0,0:05:55.36,0:05:57.35,Default,,0000,0000,0000,,And over here, we\Nwill call it M1.
Dialogue: 0,0:05:57.35,0:05:59.85,Default,,0000,0000,0000,,And here, there's a couple of\Nways you could think about it.
Dialogue: 0,0:05:59.85,0:06:02.30,Default,,0000,0000,0000,,You could think about it as\Nall of the currency that's
Dialogue: 0,0:06:02.30,0:06:05.70,Default,,0000,0000,0000,,in people's pockets plus all of\Nthe check writing capabilities.
Dialogue: 0,0:06:05.70,0:06:07.20,Default,,0000,0000,0000,,So if you view it\Nthat way it, would
Dialogue: 0,0:06:07.20,0:06:11.34,Default,,0000,0000,0000,,be this $2 plus $5 of\Ncheck writing capabilities
Dialogue: 0,0:06:11.34,0:06:12.52,Default,,0000,0000,0000,,right over here.
Dialogue: 0,0:06:12.52,0:06:14.66,Default,,0000,0000,0000,,So you could have $2\Nof physical currency
Dialogue: 0,0:06:14.66,0:06:17.52,Default,,0000,0000,0000,,that's in people's wallets,\Nnot in bank reserves,
Dialogue: 0,0:06:17.52,0:06:24.40,Default,,0000,0000,0000,,plus the $5 of check\Nwriting capability,
Dialogue: 0,0:06:24.40,0:06:26.46,Default,,0000,0000,0000,,which would give you $7.
Dialogue: 0,0:06:26.46,0:06:28.58,Default,,0000,0000,0000,,Another way you\Ncould view it, you
Dialogue: 0,0:06:28.58,0:06:35.39,Default,,0000,0000,0000,,could view it as M0\Nplus checkable deposits.
Dialogue: 0,0:06:35.39,0:06:37.40,Default,,0000,0000,0000,,I'll just write checks\Nhere, plus-- well
Dialogue: 0,0:06:37.40,0:06:39.77,Default,,0000,0000,0000,,I'll write-- checkable deposits.
Dialogue: 0,0:06:39.77,0:06:41.41,Default,,0000,0000,0000,,But if you do that,\Nyou are now double
Dialogue: 0,0:06:41.41,0:06:43.62,Default,,0000,0000,0000,,counting because\Nsome of the M0 is
Dialogue: 0,0:06:43.62,0:06:46.00,Default,,0000,0000,0000,,reserves in the\Ncheckable deposits.
Dialogue: 0,0:06:46.00,0:06:47.96,Default,,0000,0000,0000,,Or you could say some of\Nthe checkable deposits
Dialogue: 0,0:06:47.96,0:06:50.11,Default,,0000,0000,0000,,is held as reserves for M0.
Dialogue: 0,0:06:50.11,0:06:53.16,Default,,0000,0000,0000,,So then you would have to\Nsubtract out the bank reserves.
Dialogue: 0,0:06:56.88,0:06:59.24,Default,,0000,0000,0000,,And so then you would\Nget $4 because we
Dialogue: 0,0:06:59.24,0:07:01.28,Default,,0000,0000,0000,,don't want to double count\Nthese right over here.
Dialogue: 0,0:07:01.28,0:07:04.20,Default,,0000,0000,0000,,You would get M0 is $4.
Dialogue: 0,0:07:04.20,0:07:06.42,Default,,0000,0000,0000,,And I want to do that in white.
Dialogue: 0,0:07:06.42,0:07:10.69,Default,,0000,0000,0000,,M0 is $4.
Dialogue: 0,0:07:10.69,0:07:16.08,Default,,0000,0000,0000,,The checkable deposits is $5.
Dialogue: 0,0:07:16.08,0:07:17.58,Default,,0000,0000,0000,,Let me do that in the pink.
Dialogue: 0,0:07:17.58,0:07:19.61,Default,,0000,0000,0000,,Plus the $5.
Dialogue: 0,0:07:19.61,0:07:22.07,Default,,0000,0000,0000,,And then you would want to\Nsubtract out the reserves.
Dialogue: 0,0:07:22.07,0:07:24.27,Default,,0000,0000,0000,,And the reserves here, there\Nare $2 of the reserves.
Dialogue: 0,0:07:24.27,0:07:27.08,Default,,0000,0000,0000,,So minus $2.
Dialogue: 0,0:07:27.08,0:07:30.92,Default,,0000,0000,0000,,And you would get\Nyourself back to the $7.
Dialogue: 0,0:07:30.92,0:07:33.42,Default,,0000,0000,0000,,And the whole point of this is\Nso you're not double counting
Dialogue: 0,0:07:33.42,0:07:35.88,Default,,0000,0000,0000,,something, you're not double\Ncounting this right over here,
Dialogue: 0,0:07:35.88,0:07:41.43,Default,,0000,0000,0000,,as part of checkable\Ndeposits and part of the M0.
Dialogue: 0,0:07:41.43,0:07:43.48,Default,,0000,0000,0000,,You're not using this twice.
Dialogue: 0,0:07:43.48,0:07:45.66,Default,,0000,0000,0000,,It's not part of the base money.
Dialogue: 0,0:07:45.66,0:07:48.01,Default,,0000,0000,0000,,It is both the base money\Nand checkable deposits.
Dialogue: 0,0:07:48.01,0:07:49.79,Default,,0000,0000,0000,,And we don't want\Nto count it twice.
Dialogue: 0,0:07:49.79,0:07:51.27,Default,,0000,0000,0000,,So the simplest\Nway to think about
Dialogue: 0,0:07:51.27,0:07:53.48,Default,,0000,0000,0000,,is, well, what can be used\Nin this broader definition
Dialogue: 0,0:07:53.48,0:07:55.11,Default,,0000,0000,0000,,to facilitate transactions?
Dialogue: 0,0:07:55.11,0:07:57.41,Default,,0000,0000,0000,,These $2 in people's\Npockets, and this ability
Dialogue: 0,0:07:57.41,0:07:59.55,Default,,0000,0000,0000,,to write up to $5 of checks.
Dialogue: 0,0:07:59.55,0:08:02.16,Default,,0000,0000,0000,,So that's this view\Nright over here.
Dialogue: 0,0:08:02.16,0:08:04.12,Default,,0000,0000,0000,,And if we want to get\Neven broader than that,
Dialogue: 0,0:08:04.12,0:08:06.81,Default,,0000,0000,0000,,we can get to\Nsomething called M2.
Dialogue: 0,0:08:06.81,0:08:08.68,Default,,0000,0000,0000,,And here we could say,\NOK, what's immediately
Dialogue: 0,0:08:08.68,0:08:12.28,Default,,0000,0000,0000,,usable to facilitate a\Ntransaction right now?
Dialogue: 0,0:08:12.28,0:08:14.26,Default,,0000,0000,0000,,So that would be our M1.
Dialogue: 0,0:08:14.26,0:08:16.25,Default,,0000,0000,0000,,So that would be our $7 of M1.
Dialogue: 0,0:08:16.25,0:08:19.40,Default,,0000,0000,0000,,Plus things that can be\Neasily converted to M1.
Dialogue: 0,0:08:19.40,0:08:21.22,Default,,0000,0000,0000,,So for example, these\Nsavings accounts
Dialogue: 0,0:08:21.22,0:08:23.11,Default,,0000,0000,0000,,can be easily converted\Nto checking accounts.
Dialogue: 0,0:08:23.11,0:08:24.53,Default,,0000,0000,0000,,It might only take\Na couple of days.
Dialogue: 0,0:08:24.53,0:08:25.92,Default,,0000,0000,0000,,There might be\Nsome restrictions.
Dialogue: 0,0:08:25.92,0:08:27.02,Default,,0000,0000,0000,,But it can be converted.
Dialogue: 0,0:08:27.02,0:08:29.40,Default,,0000,0000,0000,,And when it gets converted\Nwill change the bank's reserve
Dialogue: 0,0:08:29.40,0:08:30.77,Default,,0000,0000,0000,,requirements a little bit.
Dialogue: 0,0:08:30.77,0:08:33.36,Default,,0000,0000,0000,,But it will allow, if\Nthis person converts it
Dialogue: 0,0:08:33.36,0:08:36.17,Default,,0000,0000,0000,,they will have the ability\Nto write more checks.
Dialogue: 0,0:08:36.17,0:08:38.91,Default,,0000,0000,0000,,So M2 includes M1\Nplus things that
Dialogue: 0,0:08:38.91,0:08:40.74,Default,,0000,0000,0000,,are very easy to convert to M1.
Dialogue: 0,0:08:40.74,0:08:45.52,Default,,0000,0000,0000,,And so they'll include things\Nlike savings accounts, money
Dialogue: 0,0:08:45.52,0:08:47.64,Default,,0000,0000,0000,,market accounts, which I\Nwon't go into detail here.
Dialogue: 0,0:08:47.64,0:08:49.19,Default,,0000,0000,0000,,But they're really kind\Nof similar in that you
Dialogue: 0,0:08:49.19,0:08:50.47,Default,,0000,0000,0000,,get slightly higher\Ninterest, but there
Dialogue: 0,0:08:50.47,0:08:52.44,Default,,0000,0000,0000,,are restrictions on your\Nability to access it.
Dialogue: 0,0:08:52.44,0:08:56.48,Default,,0000,0000,0000,,But it's not too hard to turn\Nit into checking accounts.
Dialogue: 0,0:08:56.48,0:09:00.07,Default,,0000,0000,0000,,And small dollar value\Ntime deposit, CD accounts.
Dialogue: 0,0:09:00.07,0:09:02.07,Default,,0000,0000,0000,,But for the sake of\Nsimplicity, in this example,
Dialogue: 0,0:09:02.07,0:09:03.99,Default,,0000,0000,0000,,it would be the saving accounts.
Dialogue: 0,0:09:03.99,0:09:09.62,Default,,0000,0000,0000,,So it would be our\N$7 of M1, plus the $2
Dialogue: 0,0:09:09.62,0:09:11.18,Default,,0000,0000,0000,,of savings accounts\Nright over here.
Dialogue: 0,0:09:15.53,0:09:17.11,Default,,0000,0000,0000,,So this is just to\Ngive you a picture.
Dialogue: 0,0:09:17.11,0:09:18.19,Default,,0000,0000,0000,,When someone talks\Nabout the money
Dialogue: 0,0:09:18.19,0:09:19.38,Default,,0000,0000,0000,,supply you really\Nhave to say, well,
Dialogue: 0,0:09:19.38,0:09:20.50,Default,,0000,0000,0000,,what are you talking about?
Dialogue: 0,0:09:20.50,0:09:23.68,Default,,0000,0000,0000,,The most typical one is that\Nyou're really talking about M1,
Dialogue: 0,0:09:23.68,0:09:27.06,Default,,0000,0000,0000,,because this is the stuff that's\Ndirectly usable to facilitate
Dialogue: 0,0:09:27.06,0:09:27.88,Default,,0000,0000,0000,,transactions.
Dialogue: 0,0:09:27.88,0:09:29.59,Default,,0000,0000,0000,,Things like the ability\Nto write a check,
Dialogue: 0,0:09:29.59,0:09:31.52,Default,,0000,0000,0000,,or dollar bills in\Nsomeone's wallet.
Dialogue: 0,0:09:31.52,0:09:35.31,Default,,0000,0000,0000,,But they might be talking about\Nbase money, M0, narrow money,
Dialogue: 0,0:09:35.31,0:09:36.93,Default,,0000,0000,0000,,always of referring\Nto the same thing,
Dialogue: 0,0:09:36.93,0:09:38.07,Default,,0000,0000,0000,,especially in the United States.
Dialogue: 0,0:09:38.07,0:09:40.41,Default,,0000,0000,0000,,Or they might be referring\Nto something even broader.
Dialogue: 0,0:09:40.41,0:09:41.78,Default,,0000,0000,0000,,And there are\Nbroader definitions
Dialogue: 0,0:09:41.78,0:09:44.40,Default,,0000,0000,0000,,even than M2,\Nalthough M3, they've
Dialogue: 0,0:09:44.40,0:09:45.72,Default,,0000,0000,0000,,stopped reporting about it.
Dialogue: 0,0:09:45.72,0:09:48.63,Default,,0000,0000,0000,,But M3 would have things\Nthat are a little bit further
Dialogue: 0,0:09:48.63,0:09:51.76,Default,,0000,0000,0000,,from being true money, from\Nbeing a checking account.
Dialogue: 0,0:09:51.76,0:09:53.98,Default,,0000,0000,0000,,But they are already\Nfairly liquid
Dialogue: 0,0:09:53.98,0:09:56.13,Default,,0000,0000,0000,,and so they'll include\Nother types of assets.
Dialogue: 0,0:09:56.13,0:09:57.88,Default,,0000,0000,0000,,But the Fed has\Nstopped reporting
Dialogue: 0,0:09:57.88,0:10:00.42,Default,,0000,0000,0000,,this in the recent past.
Dialogue: 0,0:10:00.42,0:10:04.13,Default,,0000,0000,0000,,So these are the ones that\Nare typically referred to.