Glossary · Money and central banks
Money supply
The money supply is all the money people and businesses can spend: cash plus bank deposits. M2, the common US measure, adds small CDs and money market funds.
Also called: M2, M1, money stock, broad money, M2 money supply
Sep 2026: about $68,473 per person
M2, to Sep 2026
Currency in M2, Sep 2026
In plain words
How much money is there in the US? Count all the dollar bills and coins and you get only a small part of it: $2.4T in Sep 2026. Most money is not paper at all, but numbers in bank accounts. The money supply adds it all up.
Economists count it in layers. M1 is money ready to spend: cash plus checking accounts and, since 2020, ordinary savings accounts. M2 adds money a step away from spending: small time deposits and retail money market funds. US M2 was $23.4T in September 2026.
The money supply grows when banks lend, because a new loan lands in someone’s account as a new deposit, and when the central bank buys assets. It shrinks when loans are repaid. Over the 12 months to Sep 2026, M2 grew by 5.7%.
Example
How a loan creates money
- You deposit $1,000 of cash at Bank A. M2 does not change: $1,000 of cash became $1,000 of deposits.
- Bank A lends $900 to Maria for a used car. It does not take the money from your account; it adds $900 to Maria’s. Now there are $1,900 of deposits, and M2 is $900 bigger.
- Maria pays the car dealer, who deposits the $900 at Bank B. The money moved; it still exists.
- When Maria repays the loan, the $900 of deposits disappears again.
Commercial banks create most of the money supply when they lend, and destroy it when loans are repaid.
One level deeper
M2 is 81.7 times what it was in 1959 ($287B), and it rarely shrinks. Its fastest growth since 1960 was 26.8% over the 12 months to February 2021, when the Fed bought bonds and the government sent out relief payments. Then it fell, by as much as 4.7% over the 12 months to April 2023: the first fall since the series began.
Other measures: the monetary base is cash plus the reserves banks hold at the central bank, the money the central bank itself creates. Broad money is the international name for M2-like measures; the World Bank publishes it for most countries. The Fed stopped publishing M3, an even broader measure, in 2006.
In the late 1970s and early 1980s several central banks, the Fed included, tried targeting money growth directly, following Milton Friedman’s idea that inflation is always, in the end, about too much money. They gave up because the link between money and prices proved unstable from year to year: people change how much money they hold. See velocity of money.
US money supply growth since 1960
M2 usually grows a few percent a year, a little faster than the economy. In 2020–2021 growth hit 26.8% (Feb 2021); in 2022–2023 M2 shrank.
The numbers behind the chart
| Date | M2, change over 12 months |
|---|---|
| Jan 1960 | 4.0% |
| Dec 1960 | 4.9% |
| Dec 1970 | 6.6% |
| Dec 1980 | 8.5% |
| Dec 1990 | 3.8% |
| Dec 2000 | 6.2% |
| Dec 2010 | 3.7% |
| Dec 2020 | 24.5% |
| Dec 2022 | −1.0% |
| Dec 2023 | −2.4% |
| Dec 2024 | 3.4% |
| Dec 2025 | 4.0% |
| Sep 2026 | 5.7% |
Why it matters
Money growing far faster than the economy can make goods is a warning sign of inflation; in every hyperinflation, the money supply exploded first.
It shows what banks and the central bank are doing: a booming money supply means heavy lending and asset buying, a shrinking one means tightening.
It reminds you what money mostly is: bank deposits, promises recorded by banks, not paper.
A common mistake
Myth: Most money is cash printed by the government.
In fact: Cash is only about 10% of US M2 (Sep 2026). The other 90% are bank deposits and money market balances, created mostly by commercial banks when they make loans.
Questions people ask
What is M2?
The Fed’s broad measure of the US money supply: cash held by the public, checking and savings deposits, time deposits under $100,000, and retail money market funds. It was $23.4T in Sep 2026.
Why did the money supply grow so much in 2020?
The Fed bought trillions of dollars of bonds, and the government borrowed and sent money to households and firms through relief checks and loans. Much of it landed in bank accounts: M2 grew 26.8% in the 12 months to Feb 2021.
Does more money always mean more inflation?
Not one for one. Over long periods and in extreme cases, yes; in the short run it depends on whether the money is spent. After 2008 money grew with little inflation; after 2020 it was spent, and inflation jumped. See money printing.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US recessions (NBER business cycle dates): National Bureau of Economic Research (NBER), Business Cycle Dating Committee: US Business Cycle Expansions and Contractions.
- M2 money stock: Board of Governors of the Federal Reserve System, H.6 Money Stock Measures, series M2SL; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Currency component of M1 and M2: Board of Governors of the Federal Reserve System, H.6 Money Stock Measures, series CURRSL; retrieved from FRED, Federal Reserve Bank of St. Louis.
- US population (midperiod, BEA): U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 2.1, series B230RC0A052NBEA; retrieved from FRED, Federal Reserve Bank of St. Louis.
- In May 2020 the Fed moved savings deposits from the non-M1 part of M2 into M1; M2 itself was not affected.
- This page explains a term. It is not investment advice.