The U.S. Money Supply placed in context to the World's Gold Supply

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People usually have trouble comprehending the significance of the size of the total amount of U.S. Currency that exists. The Federal Reserve keeps track of two "money supply" amounts, called the M1 and M2 money supplies.

The M1 money supply consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.

The M2 money supply consists of the M1 money supply plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

In other words, an amount of gold equal to the M2 money supply is what the U.S. would need to have in reserve for redemptions if it were to go back onto the Gold Standard.

Rightly or wrongly, people do believe that they understand the value of gold. Below is a visual aid to help you see how all of the cash issued by the U.S. Government and in use world-wide is compared to the value of "All of the Gold in the World" & the value of the U.S. Gold Reserves.  The calculation and data sources are now displayed below the graph.

What this shows is that there isn't even enough gold in the entire world for even the US to go back onto the Gold Standard, much less enough in the US government's vaults, unless the US devalues the dollar relative to gold and relative to other country's currency. To switch back to the gold standard, the US would have to match US gold reserves to the M2 money supply, which means the US would have to devalue the US dollar by a factor of . (i.e. All imported goods, such as oil, would overnight increase by a factor of .)

How the calculations are made:

Search for News related to Gold and the US Money Supply:

Modern Money Mechanics: A workbook on Bank Reserves and Deposit Expansion by the Federal Reserve Bank of Chicago

Talking Points on the Likely Consequences of Re-Establishment of a Gold Standard

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