M1

Weren’t those, uh...models of beamers…? Or James Bond's boss. You know the tune: Nuh nuh nuh nuh…,nuh nuh nuh...nuh nuh nuh nuh…Or... the name of their CIA soccer team?

M5? M6? Hm. Maybe not.

Ok, ok…M1, 2, and 3 are just different measures, or gradations, for how we count the money supply in the economy. Think of these M numbers as analogs to DEFCON. One is like “get ready for nuclear war”; DEFCON 5 is like “all is well.”

Only the M numbers relate to liquidity…,i.e. how closely those M numbers approximate the easily, immediately available cash in the economy.

So M1 reflects the MOST liquid number and just includes paper currency like dolla dolla bills and coins and things like checking accounts in banks where you can walk in and, in an hour or less, get a load of cash.

M1 represents a relatively small slice of the total M number in economy or about 1 and a half trillion bucks. And yes, that’s a lot of nickels. But the total US economy is oh so big.

M2 adds to the M1 totals what’s called “near money”, money market securities, savings deposits, longer duration deposits, like 6-month CDs up to 100k, etc.

M2 totals almost 8 trillion bucks these days.

And its big delineation? It can be converted (hallelujah) to money, i.e., converted to M1.

M3 is the biggest slice of the pie, and it includes:

Time deposits more than 100k, euro dollar deposits over 100k, other things that take more than a day, roughly to be converted into cash.

As long as all that makes sense to you, then uh…“all is well”...