Defining money

All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.

John Adams
In a letter to Thomas Jefferson

 

In order to fully understand the arguments presented in this resources section, we need to define what we mean by money, or more specifically "broad money" - which is a term often used by the RBA.

Definition of money

 

Now let's look at a graph from the RBA as given below.

 

rba - broad money

 

This graph shows the annual percentage increase in broad money. For our purposes - note that the major components of broad money as shown on the graph are:

  • Currency     (which is coins and paper notes).
  • CDs              (which means Certificate of Deposit, or colloquially a "term deposit").
  • Deposits      (much like a savings account or a cheque account).

 

In summary -  broad money means: notes and coins plus all deposits.

 

Each and every time a bank makes a loan, new bank credit is created – new deposits – brand new money.

Graham Towers
Former governor of the Central Bank of Canada
1939