Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
SlideShare a Scribd company logo

Bba360 team6 project6

•Download as PPT, PDF•
•
V
VanVayner

This document discusses money supply and related economic indicators in the United States, European Union, and China. It provides definitions of different measures of money supply (M0-M3) and notes that the US money supply decreased from 2008-2011 while the EU and China saw increases. It also discusses related trends in GDP, inflation rates, and how changes in money supply can impact economic growth, unemployment, and prices. Overall it analyzes how changes in money supply have affected economic performance and inflation in these major economies in recent decades.

1 of 11
 Stephen Spears – Team Leader  Frank Bernal – Researcher  Donald Parkhurst – Researcher  Cortney Coyne – Voice Talent  Van Vayner - Editor
 Money Supply - The total supply of money in circulation in a given country's economy at a given time  M0, the total of all physical currency, plus accounts that can be exchanged to physical currency  M1, a narrow measure of money’s function as a medium of exchange  M2, a broader measure that also reflects money’s function as a store of value  M3, a still broader measure that covers items that many regard as close substitutes for money
 In 2006 the Federal Reserve stopped publishing M3 data, however, private sources do give estimates of M3.  The U.S. money supply has grown from its all time high in the 2008 to an all time low in 2011. Although since the 3rd quarter of 2011 the money supply has increased and shows extremely small signs of increasing.  The Money supply decreased from about 2008 to 2011, which caused unemployment to increase at staging rates, prices to decrease, and home values to plummet.
 Due in large part of the global financial crisis that began in 2008, the European Union has increased the money supply slightly.  The makeup of the Union makes the control of its money supply difficult at best and impossible at worst.  The EU continues to struggle to gain momentum to a stable economy like the US and much of the world as a hole.
 China’s money supply has shown a steady increase for the past decade, 2008 saw a much more rapid increase in the amount of money in the Chinese economy.  A major factor for this increase in money supply has to do with the exchange rate, which is a process in every currency in the world, is valued.  Depending on this value is how many Chinese Yuan one will receive in exchange for one US dollar.  China has been receiving much criticism of their valuation process of other countries currency.  Regardless China holds a large amount of foreign reserves which contribute to its money supply.
 An increase in the supply of money works both through lowering interest rates by putting more money in the hands of consumers.  If the money supply continues to expand, prices begin to rise. This inflation leads higher interest rates to offset an expected decline in purchasing power over the life of loans.  When the supply of money falls or when its rate of growth declines Economic activity declines and either disinflation or deflation are results.  Other leading economic indicators of world economies are Gross Domestic Product (GDP) per capita, often considered an indicator of a countries' standard of living, and Consumer Price Index (CPI), a measure for inflation. They also play an important role of economy’s health and economic performance.
 From 1998 to 2008 the  Like much of the China’s rise in GDP has Gross Domestic Product globe the EU’s GDP been a slow and steady (GDP) showed steady has been affected by increase since the 1980’s. growth. In 2008 GDP started the global financial However, since about 1992 a steady decrease until meltdown. Like the US China’s GDP has seen rapid 2011. As GDP decreased the EU continues to growth and it continues today. job creation slowed, which see a decline in GDP. Even though China’s in lead to increased inflation. The chart above shows experiencing an increase in 2011 saw an increase in the relationship GDP, low-income wage GDP compared to previous between the US and earners see little to no change years but the future is still the EU’s GDP. in their lives. As China’s unclear as the U.S economy economy continues to grow struggles to regain making china an extremely momentum. strong member of the global economy.
 A continued growth of the  After an increase in its  The chart above Consumer Price Index (CPI) money supply in 2008, that from the 4th quarter of 2009 to clearly illustrates China’s triggered an increase in consistent CPI increase the end of the 1st quarter of inflation the EU’s CPI 2012. This means that there over the past 3 decades. increased markedly. Gross A slight dip in 2008 was a is an increase in imports of Domestic Product (GDP) goods which correlates to the result of the global and money supply has since financial crisis which had price of goods and services in leveled off, but the CPI has the U.S. to increase. Although an impact on financial continued to increase markets across the in recent years the CPI has slowly. CPI”s that rise shown a steady increase, globe. A rise in China’s slightly over time is a sign of CPI is typically due to an unemployment remains at a a stable economy. high contributing to inflation. increase in money supply.
United States European Union  Since 1914 a sustained decline of the money supply has occurred  (Recent History)In November during only three business cycle 2011, it was reported by The contractions: 1920–1921, 1929– Telegraph that the EU's money 1933, and 1937–1938. The severity supply was rapidly falling. This has of the economic decline in each of led to fears that countries that are these downturns was a consequence part of the EU may default on of the reduction in the quantity of several major debts. If this comes to money, the decline in output and rise pass it would mean a severe in unemployment. economic downturn for the EU.  Since 1914 there have been three major price inflations; each has been preceded and accompanied by an increase in the rate of growth of the money supply: 1914–1920, 1939–1948, and 1967–1980. In each case a increase of money supply that outstripped real output led to inflation.
 In conclusion we feel that money supply should be held stable. A large growth in money supply invariably leads to inflation and higher interest rates. A downturn in money supply leads to deflation/disinflation and a slow down in consumer spending. If this slowdown is severe enough, it could lead to loss of jobs and a more troublesome downturn. Keeping a stable money supply would assist in keeping interest rates in check, prices stable and give consumers enough money spend, thus growing the economy.
• ECB Statistical Data Warehouse. (n.d.). ECB Statistical Data Warehouse. Retrieved from http://sdw.ecb.europa.eu/ • Evans-Pitchard, A. (2011, November 28). "Europe's Shrinking Money Supply Flashes Slump Warning." The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/financialcrisis/8921720/Europes-shrinking-money-supply-flashes-slump-warning.html • Money Supply Charts. (n.d.). Shadow Government Statistics. Retrieved from http://www.shadowstats.com/alternate_data/money-supply-charts • Money Supply. (n.d.) What Is ? Definition and Meaning. Retrieved from http://www.investorwords.com/3110/money_supply.html • Schwartz, A. (n.d.). Money Supply. The Concise Encyclopedia of Economics. Retrieved from http://www.econlib.org/library/Enc/MoneySupply.html • Credit & Money Supply in the USA and China. (n.d.). Economics Junkie. Retrieved from http://www.economicsjunkie.com/credit-money-supply-in-the-usa-and-china • Consumer Price Index (2005 = 100) in China. (n.d.). TradingEconomics.com. Retrieved from http://www.tradingeconomics.com/china/consumer-price-index-2005--100-wb-data.html • Consumer Price Index. (n.d.). Bureau of Labor Statistics. Retrieved from http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CU_cpibrief • Euro Area Inflation Rate. (n.d.). TradingEconomics. Retrieved from http://www.tradingeconomics.com/euro-area/inflation-cpi • Expected Developments and Associated Opportunities and Risks. (n.d.). Management Report on the Group. Retrieved from http://www.thyssenkrupp.com/financial-reports/10_11/en/expected_developments.html • Global Gold Supply vs. the Money Supply. (2009, 28 January). Global Gold Supply vs. the Money Supply. Retrieved from http://goldnews.bullionvault.com/gold_money_supply_012820093 • Gross Domestic Product. (n.d). Euro Economics. Retrieved from http://www.unc.edu/depts/europe/euroeconomics/GDP.php • The Street Light. (2011, October 31). The street Light Blog. Retrieved from http://streetlightblog.blogspot.com/2011_10_01_archive.html • United States GDP per Capita. (n.d). TradingEconomics. Retrieved from http://www.tradingeconomics.com/united-states/gdp-per-capita

More Related Content

Bba360 team6 project6

  • 1. Stephen Spears – Team Leader  Frank Bernal – Researcher  Donald Parkhurst – Researcher  Cortney Coyne – Voice Talent  Van Vayner - Editor
  • 2. Money Supply - The total supply of money in circulation in a given country's economy at a given time  M0, the total of all physical currency, plus accounts that can be exchanged to physical currency  M1, a narrow measure of money’s function as a medium of exchange  M2, a broader measure that also reflects money’s function as a store of value  M3, a still broader measure that covers items that many regard as close substitutes for money
  • 3.  In 2006 the Federal Reserve stopped publishing M3 data, however, private sources do give estimates of M3.  The U.S. money supply has grown from its all time high in the 2008 to an all time low in 2011. Although since the 3rd quarter of 2011 the money supply has increased and shows extremely small signs of increasing.  The Money supply decreased from about 2008 to 2011, which caused unemployment to increase at staging rates, prices to decrease, and home values to plummet.
  • 4. Due in large part of the global financial crisis that began in 2008, the European Union has increased the money supply slightly.  The makeup of the Union makes the control of its money supply difficult at best and impossible at worst.  The EU continues to struggle to gain momentum to a stable economy like the US and much of the world as a hole.
  • 5. China’s money supply has shown a steady increase for the past decade, 2008 saw a much more rapid increase in the amount of money in the Chinese economy.  A major factor for this increase in money supply has to do with the exchange rate, which is a process in every currency in the world, is valued.  Depending on this value is how many Chinese Yuan one will receive in exchange for one US dollar.  China has been receiving much criticism of their valuation process of other countries currency.  Regardless China holds a large amount of foreign reserves which contribute to its money supply.
  • 6. An increase in the supply of money works both through lowering interest rates by putting more money in the hands of consumers.  If the money supply continues to expand, prices begin to rise. This inflation leads higher interest rates to offset an expected decline in purchasing power over the life of loans.  When the supply of money falls or when its rate of growth declines Economic activity declines and either disinflation or deflation are results.  Other leading economic indicators of world economies are Gross Domestic Product (GDP) per capita, often considered an indicator of a countries' standard of living, and Consumer Price Index (CPI), a measure for inflation. They also play an important role of economy’s health and economic performance.
  • 7.  From 1998 to 2008 the  Like much of the China’s rise in GDP has Gross Domestic Product globe the EU’s GDP been a slow and steady (GDP) showed steady has been affected by increase since the 1980’s. growth. In 2008 GDP started the global financial However, since about 1992 a steady decrease until meltdown. Like the US China’s GDP has seen rapid 2011. As GDP decreased the EU continues to growth and it continues today. job creation slowed, which see a decline in GDP. Even though China’s in lead to increased inflation. The chart above shows experiencing an increase in 2011 saw an increase in the relationship GDP, low-income wage GDP compared to previous between the US and earners see little to no change years but the future is still the EU’s GDP. in their lives. As China’s unclear as the U.S economy economy continues to grow struggles to regain making china an extremely momentum. strong member of the global economy.
  • 8.  A continued growth of the  After an increase in its  The chart above Consumer Price Index (CPI) money supply in 2008, that from the 4th quarter of 2009 to clearly illustrates China’s triggered an increase in consistent CPI increase the end of the 1st quarter of inflation the EU’s CPI 2012. This means that there over the past 3 decades. increased markedly. Gross A slight dip in 2008 was a is an increase in imports of Domestic Product (GDP) goods which correlates to the result of the global and money supply has since financial crisis which had price of goods and services in leveled off, but the CPI has the U.S. to increase. Although an impact on financial continued to increase markets across the in recent years the CPI has slowly. CPI”s that rise shown a steady increase, globe. A rise in China’s slightly over time is a sign of CPI is typically due to an unemployment remains at a a stable economy. high contributing to inflation. increase in money supply.
  • 9. United States European Union  Since 1914 a sustained decline of the money supply has occurred  (Recent History)In November during only three business cycle 2011, it was reported by The contractions: 1920–1921, 1929– Telegraph that the EU's money 1933, and 1937–1938. The severity supply was rapidly falling. This has of the economic decline in each of led to fears that countries that are these downturns was a consequence part of the EU may default on of the reduction in the quantity of several major debts. If this comes to money, the decline in output and rise pass it would mean a severe in unemployment. economic downturn for the EU.  Since 1914 there have been three major price inflations; each has been preceded and accompanied by an increase in the rate of growth of the money supply: 1914–1920, 1939–1948, and 1967–1980. In each case a increase of money supply that outstripped real output led to inflation.
  • 10. In conclusion we feel that money supply should be held stable. A large growth in money supply invariably leads to inflation and higher interest rates. A downturn in money supply leads to deflation/disinflation and a slow down in consumer spending. If this slowdown is severe enough, it could lead to loss of jobs and a more troublesome downturn. Keeping a stable money supply would assist in keeping interest rates in check, prices stable and give consumers enough money spend, thus growing the economy.
  • 11. • ECB Statistical Data Warehouse. (n.d.). ECB Statistical Data Warehouse. Retrieved from http://sdw.ecb.europa.eu/ • Evans-Pitchard, A. (2011, November 28). "Europe's Shrinking Money Supply Flashes Slump Warning." The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/financialcrisis/8921720/Europes-shrinking-money-supply-flashes-slump-warning.html • Money Supply Charts. (n.d.). Shadow Government Statistics. Retrieved from http://www.shadowstats.com/alternate_data/money-supply-charts • Money Supply. (n.d.) What Is ? Definition and Meaning. Retrieved from http://www.investorwords.com/3110/money_supply.html • Schwartz, A. (n.d.). Money Supply. The Concise Encyclopedia of Economics. Retrieved from http://www.econlib.org/library/Enc/MoneySupply.html • Credit & Money Supply in the USA and China. (n.d.). Economics Junkie. Retrieved from http://www.economicsjunkie.com/credit-money-supply-in-the-usa-and-china • Consumer Price Index (2005 = 100) in China. (n.d.). TradingEconomics.com. Retrieved from http://www.tradingeconomics.com/china/consumer-price-index-2005--100-wb-data.html • Consumer Price Index. (n.d.). Bureau of Labor Statistics. Retrieved from http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CU_cpibrief • Euro Area Inflation Rate. (n.d.). TradingEconomics. Retrieved from http://www.tradingeconomics.com/euro-area/inflation-cpi • Expected Developments and Associated Opportunities and Risks. (n.d.). Management Report on the Group. Retrieved from http://www.thyssenkrupp.com/financial-reports/10_11/en/expected_developments.html • Global Gold Supply vs. the Money Supply. (2009, 28 January). Global Gold Supply vs. the Money Supply. Retrieved from http://goldnews.bullionvault.com/gold_money_supply_012820093 • Gross Domestic Product. (n.d). Euro Economics. Retrieved from http://www.unc.edu/depts/europe/euroeconomics/GDP.php • The Street Light. (2011, October 31). The street Light Blog. Retrieved from http://streetlightblog.blogspot.com/2011_10_01_archive.html • United States GDP per Capita. (n.d). TradingEconomics. Retrieved from http://www.tradingeconomics.com/united-states/gdp-per-capita

Editor's Notes

  1. This pie chart illustrates that the Money supply of the US and the EU are extremely similar. China is about 10 percentage points away, but is continuing to grow.
  2. The Federal Reserve ceased to publish U.S. M3 data in 2006. Numbers from after this time are estimates.
  3. And Thank you for your Attention!