March 2014:
FRED Blog says this graph "shows how the composition of M2 has changed over time." Sounds about right; that, and that the graph shows the components "as shares of total M2."
But that's not what the graph says. The graph says it shows "(Billions of Dollars)". If that is correct, then the graph shows that M2 money has been stable at 100 billion dollars since 1960. It shows that M1 money (the top edge of the green region) is now about 25 billion dollars, half as much as it was in 1960.
Hard to believe.
Of course, it is the label of the vertical axis that is wrong. The graph doesn't show billions of dollars. It shows percent of total M2.
This is an error in the "new" FRED Graphing routines -- one of many errors that still exist in those routines. The old FRED Graphing routines were pretty much free of such errors. Gone are the days.
I miss the old FRED.
2 comments:
I was a little disappointed in what the graph shows. The red, purple and green are components of M1, not M2. Then M1 is a component of M2... M1 is the part of M2 that's "readily accessible for spending", FRED says.
The rest of it, the big blue part on the graph above, is described in the FRED Blog post as "savings accounts, small time-deposit accounts, and money funds". The not-so-readily-accessible parts. Those, along with M1, are the components of M2 money. That's what I was hoping to see. But that's what they don't show.
The FRED Blog graph is important because it shows M1 money as a percent of M2 money. It's not presented that way, but that's what it shows, and it's the important thing in the post. Here are a couple links to my thoughts on the topic:
2 August 2012: "...when savings is a large portion of M2, and circulating is a small part, the economy does poorly. And ... when savings is a small part of M2 and circulating is a large part, the economy does well."
19 August 2013: "If the total quantity of money is kept in a window, but the circulating portion of it is declining as part of the total, then the quantity of money available for transactions is declining relative to GDP. That's a problem."
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