[OPE-L:1776] Re: RE: the money supply

Subject: [OPE-L:1776] Re: RE: the money supply
From: Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Date: Tue Nov 30 1999 - 08:56:30 EST

On Tue, 30 Nov 1999, Chai-on Lee wrote:

> (1) Does Jerry mean that the currency can only be created by
> the central bank at the present system?


> (2) Can the reserves held by private depository banks at the
> central bank be included in the currency because the private
> banks are included in the public?

The usual taxonomy says that "money" (M1) equals "currency in
the hands of the public" (excluding bank vault cash) plus
checkable deposits, while base money equals total currency
(including vault cash) plus the commercial banks' reserve
deposits with the central bank.

> (3) May we use the term, currency, interchangeably with cash
> or with base money? If then, why do people invent such many
> words that indicate the same thing?

Currency and base money are not synonymous, as explained
above. Base money is the total liabilities of the central bank,
of which currency is a part. "Currency" and "cash" are pretty
much the same thing, but "cash" is a more "popular" and somewhat
vaguer term (in commercial usage "cash" might include checking

Allin Cottrell.

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