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The World’s Money Supply Surpassed GDP in 1999.

In Money Supply on May 5, 2011 by CQCA

The chart above shows the World Bank’s calculation for M2 money supply as a percent of GDP. In 1999, M2 surpassed GDP. Since then, it has increased by about 20%.

Why does this number seem different than the data on each country? There are a few reasons: (1) M2 does not include currency held outside of the issuing country (i.e. U.S. Dollars held in London or Ulannbaatar). The largest currencies (also the lowest inflators) are international currencies, so their true growth would be hidden. (2) A much more important factor is that GDP has also been growing over this time, so it would mitigate the increase. (3) The World Bank has no idea what it is doing, and its numbers often contradict the numbers produced by individual countries’ central banks.

The third reason seems much more likely. The World Bank has not even written anything on this subject, and they do not indicate their methodology for calculating the number.

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