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Global Money Supply Monitor
Understanding money supply dynamics plays a critical role in comprehending the economic landscape. Money supply is a vital indicator, influencing inflation, economic growth, and financial stability within countries and globally. The nuances of money supply hold the key to predicting economic trends, formulating effective monetary policies, and making informed financial decisions. This report examines this crucial metric, offering valuable insights for economists, policymakers, investors, and anyone seeking a deeper understanding of the global economy.
The Global Money Supply Monitor (GMSM) tracks, analyzes, and monitors global money supply trends across economies, and their impact on the global landscape, including inflation, commodity and asset valuation. With comprehensive coverage of 169 countries and territories, representing 99% of the world's GDP, the GMSM provides a unique perspective. The data is systematically categorized into groups: 'advanced economies' and 'emerging markets and developing economies,' as well as by continents, regions, and Western and East Asian economies. Additionally, individual country monitoring ensures a granular level of detail.
Global Money Supply
Following a pandemic-fueled 24.1% surge combined in 2020 and 2021, the global money supply (broad money) experienced a contraction throughout 2022 and 2023. This trend was particularly pronounced in advanced economies that experienced a 6.4% decrease against a 0.9% downturn globally.
On a longer timeframe, between 2000 and Q3 2023, the global money supply surged from USD 26 trillion to USD 125 trillion, marking an annual growth rate of 7.1%. During the same period, world real GDP and inflation exhibited approximate growth rates of 3.5% and 4.2%, respectively. Concurrently, the ratio of money supply to nominal GDP rose from 78% to approximately 120%. Looking more closely, between 2001 and 2011, a 10.4% annual growth rate of the global money supply coincided with several events, including a spike in commodity prices, robust global trade growth, and the 2008 financial crisis. Subsequently, global money supply growth moderated to 4.2%, aligning with a decline in commodity prices between 2011 and 2019.
Divergent Trends in Money Supply Growth
In 2023, advanced economies (AEs) comprised 54.3% of the global money supply, while emerging markets and developing countries (EMDEs) represented 45.7%.
The money supply, however, shows distinct trends across economies. Between 2000 and 2023, the annual growth in the money supply stood at 5.0% in advanced economies, 12.4% in EMDEs, and 9.2% in EMDEs excluding China. To highlight a few big players, the money supply saw an annual growth of 6.5% in the United States, 5.4% in the Euro Area, 5.9% in the United Kingdom, and 14.3% in China. Within advanced economies, Australia and Canada recorded rates around 7.5%, exceeding the global average, while the United States and the United Kingdom aligned more closely with the global trend. Japan and Switzerland, on the other hand, saw significantly slower growth at 2.2% and 3.9%, respectively.
Money Supply-to-Real GDP Ratio and CPI
in Advanced Economies
Since 2000, the relationship between money supply and inflation has weakened in advanced economies. From 1980 to 2000, an average annual money supply growth of 7.3% coincided with 4.1% inflation and 3.0% economic growth. However, between 2000 and 2023, despite an annual average money supply growth of 5.8%, inflation stood only at 2.1%, with accompanying economic growth at 1.7%. These contrasting figures indicate a notable divergence in the impact of money supply growth on inflation during this period.
Money Supply Impacts on Asset Valuation
The impact of money supply on asset valuation is profound, playing a key role in financial markets for assets like gold, equities, and real estate. World equity market capitalization, for instance, rocketed from USD 17 trillion in 1995 to USD 100 trillion by 2022, with an annual growth rate of 6.7%, which is remarkably similar to the global money supply growth rate over the same period. In the United States, the S&P 500 price index mirrored the growth of the U.S. M2 money supply over the past century. Similarly, all three major U.S. stock market indices—the S&P 500, Dow Jones Industrial Average, and Wilshire 5000—exhibited near-identical growth rates of around 6.5% in tandem with M2 from the 1990s to 2022. Furthermore, the gold price also seemed to dance to the tune of money supply. From the 1960s to 2022, its annual growth rate of 6% matched that of the U.S. M2, suggesting an adjustment based on money supply after the Bretton Woods system's demise in 1971. Nonetheless, the relationship between money supply and asset valuation is intricate and multifaceted, with numerous factors, beyond just money supply growth, influencing prices during specific periods.
Robust Money Supply in China and East Asia
China played a dominant role in the global money supply growth over the last two decades, propelled by robust economic expansion, capital formation, and manufactured exports. China's economy experienced an annual growth rate of 8.4% between 2000 and 2022, in contrast to approximately 3.0% for the rest of the world excluding China. During the same period, China's manufacturing exports rose by 13.1% annually, while the rest of the world experienced a growth rate of 4.7%. Additionally, China's inflation rate was slightly more than half of the global average.
In 2022, China's 30.7% share of the global money supply mirrored its significant footprint in the global economy, as evidenced by its 28.9% share in gross fixed capital formation, 30.5% in manufacturing value added, and 21.2% in manufacturing exports.
Insights and Visualizations
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GMSM 2023 Overview
Economies Summary
Global Money Supply Data
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