Monetary Base Companion - 2019 Q3

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Going to keep this relatively quick. Hopefully I always say that. And then blabber about a lot of things that get on these tangents but The tweet storm the tweet thread. Recording this on the same day was released November Fifth Breath Twenty nineteen. And that's the that's the data that Always Sophie curious how this works. This is just a snapshot so All all of the supply data the inflation data comes from central banks as of the month before the quarter end before which is obviously September. Are Two thousand nineteen but we do have the FX data if anything has sort of changed the pricing data specifically for Bitcoin as has You know even the last month and for Bitcoin even this day so when you look at the table All the pricing data for Bitcoin will be as of November fifth and and all the percentage of sort of go from there obviously bitcoin's a bit more volatile more price action than most currencies So so that's how that's how it works. I'm going to go through as I said. Just a couple couple of the tweets couple of the charts and And then that'll be it You know we. We've said this a lot and I have to really say it every episode where we We review the monetary base update. But just to remind you The monetary base. We've been positing for pretty much. The entire existence of the show is the only money supply economically compares with Bitcoin. Why because the monetary base is the money supply? That is its own thing. There's no claim there's no third party. There's no visa. There's no mastercard. There's no check there's no there's no credit card. There's no debit card. The money supply. I that is the monetary base. It is its own thing. So golden silver represented that in the past silver more anciently than gold sort took over in the eighteenth nineteenth twentieth centuries and then During the course of the twentieth century wars and Bretton Woods awards and US The mighty dollar taking control of the Global System in the global financial system completely when Nixon's severed the gold supply Sorry Gold Window. Gold Redeem a window in August fifteenth. Nineteen seventy one The dollar took over completely and other Central banks thanks realized that they could make their own monetary basis float In many did from that point on there was no Connection to gold at all So from Nineteen seventy-one Global Fiat. That is called the monetary base. Where do we find it on the liability portion of the central bank's balance sheets That's is the money supply the compares with Bitcoin and then obviously You know forty years on from from nineteen seventy-one we have We have bitcoin being released so bitcoin itself is very unique Obviously very unique for financial world. But if you want to try to understand Dan you want to compare it. You WanNa look at. What's going on the monetary world? You need to look at credit cards debit cards. Checking accounts savings accounts announced time deposits. Those things are thank money and I'll have something to say about that in a second They're not state money. They're not not monetary monetary base. They're not money. That is its own thing. Absent of any claim That's that's that's the key difference between your checking account credit cards so on and so forth and and base money or the monetary base which. bitcoin is so we track it. We You know we're we're continuously expanding it right now we're at the top thirty Fiat currencies in the world top thirty floating Fiat currencies in the world. That's another another important distinction just to keep it all straight so the dollar the euro the yen the UN the Indian Rupee Gray pounds so on and so forth If you add up the top thirty floating currencies and then add up all of the other currencies that are pegged to those currencies. You get something. That's about ninety five percent of global. GDP eighty eighty percent of the global population. So it's not the whole world but it's pretty darn big economically and It can give us an idea idea of what we're talking about when we say that bitcoin these scale to be global money. It's a global monetary base. That is it. That's the money supply. All right what does it comprise and Fiat world. Two things primarily cash in coin which you know cashing corn in your wallet. You know everything that you take out of. ATM EVERY EVERY GROCERY STORE. If you make change all of the Physical cash currency is floating around the world dollars euros yen. The paper notes the coins as well. Even those are quite small token these days. The cash coin the value of that together is part of the monetary base. And then the other part. It's a bit more confusing. The other part is what you call commercial bank reserves and I always say this just to keep it simple Imagine you have your own bank account with your bank. Well every bank in the system in the world so it works today. They have an account with their central bank and that account it's called the master. Count the Reserve zurve account the Commercial Bank reserves if you aggregate them all up. It's that is the Commercial Bank reserve portion of the monetary base and. That's that's so there's physical and digital physical currency and digital currency and for a decades that split roughly eighty twenty That tweet Those two tweets are tweets eight and and nine You know the split was roughly eighty twenty physical to digital but then obviously the global financial crisis and the slide Central banks intervened much more pump liquidity into the system. And what that means is when they said what that means we say printing money that means literally adding adding By the stroke of Pan Stroke of a key adding thank reserves to central banks. And that's the monopoly power that they can do. Don't worry about necessarily even how they do it. They do it simply by buying assets maybe they buy bonds from banks maybe by something else from a bank but basically the Fed can automatically just swap swap. Whatever sort of asset a commercial bank is holding? Maybe it's a it's a it's a bond government bond doesn't have to be government bond they can also go directly To even other holders like the Bank of Japan they They buy equities can buy whatever they want and when they do that transaction They you you know it's it's it's their impetus it's that they're the sort of the starting points chicken and the egg thing they they are the ones that initiate that process they At the end of the day can add or subtract reserves to the bank account of all the banks In the world. That's how the that's the central banking system works so it's two components. It's that digital portion. The ledger portion that master count and then the other portion is physical currency physical cash and coin. I mean that literally they you know. They print and PLO around society it was eighty twenty and now It's something like Thirty five sixty five thirty five sixty five only thirty five percent physical sixty five percent digital Again we have to put I should say You know when when we compare all these different monetary basis you know get the Polish Lodhi We got the Mexican peso. ooh Indonesia rupiah we have the Indian rupee type Bhatt Argentine peso. He's all different currencies right different units of account so we need to put them into a standard unit. The county unit of comparison. Obviously there's only one choice in the world today for that the US dollar we could put it in euros. We we could convert all of those into euros but that Uh doesn't completely cut it The yours very strong currency. It's huge It's actually monetary basis bigger than than the dollar than the Fed's Fed's monetary base The survey's about three point four two trillion dollars the. US is three point two one as the last quarter so we could would put everything in euros but obviously just make sense with a unit of comparison. You've account to put it into dollars so when you when you look at all the different monetary bases as you convert them all to trillions then convert them all the dollars you get a number right now as of Q.. Three Twenty nineteen eighteen point eight four trillion eighteen dollars that is the global monetary base as. We calculated that. Is the money supply the compares to Bitcoin. Join now for those of you. That have been paying attention. You'll notice that's that's is going down slightly over over the past couple years about two years ago. Go In dollar terms the monetary base topped it was at its all-time high

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