Thursday, June 13, 2013

The Components of Base Money

From a recent post we know that circulating currency, together with total reserves, make up what we call "base money". Graph #1 compares base money (red) to the sum of reserves and circulating currency (blue):

Graph #1: Total of Components Equals the Monetary Base
The sum matches up well to base money as long as the numbers are available.

So we know that the two components added together do indeed equal Base Money. But don't you want to know which component makes up the bigger part of base money? I do. Graph #2 shows each component as a percent of Base Money:

Graph #2: Components as Portions of the Total
Currency (notes and coins) in circulation for the last several decades has made up the better part of base money.

Just before the problems of 2008, total reserves (red) had fallen to about 5% of base.

1 comment:

The Arthurian said...

Hey Jim -
I am thinking that FRED's currency measure CURRSL might be better than CURRCIR.

I'm thinking CURRCIR includes currency in reserves, vault cash and stuff, and CURRSL excludes the currency in reserves.

Does that sound right to you?