Lets discuss the new money supply entering the market, why M1 has seen such a big increase, and what this means for you - Enjoy! Add me on Instagram: GPStephan
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How this works:
First, we have the M0 Money Supply - This is PHYSICAL Cash Money that you have in your pocket, or the money I’m holding in my hand, or the money sitting in a bank vault.
Second, we have the M1 Money Supply - This represents a combination of money in checking accounts, and all physical cash mentioned in M0. This is money in checking accounts that could basically be converted to cash, or spent, at a moments notice.
After that, we have M2…this includes money sitting in savings accounts, money market funds, and other accounts that people hold on to with less than $100,000, but don’t use for day-to-day spending. This ALSO includes all of M1
And finally, we have M3…this covers investment accounts, retirement accounts, and other “long term holdings” that you wouldn’t necessarily spend instantly, but - you COULD get access to money if you needed to. And just like the others, M2 also includes all of M2.
First, there was a big shift of money moved from Savings Accounts and into Cash and Checking Accounts…or, to put it more appropriately…there was a big influx of M2 money supply moving into M1, where it could be more easily spent. The thinking is that this is AROUND the time where many mortgage forbearance plans were expiring, we weren’t sure if rental protections would be extended beyond December 31st, and end of year financial obligations may have caused a big move into the M1 Money Supply.
Second, this MIGHT have something to do with proposed tax plans on long term capital gains for those earning over $1 million per year. There have been quite a few proposals for an increase in tax rates and transfers, and because of that - many wealthy people have shown interest in locking in their profits, or cashing out by the end of the year to avoid a potentially HIGHER tax in the future.
Third, as people save more money and refuse to spend it - more money is going to end up in savings and cash, further inflating this amount you see here.
Or, in other words - OVERALL, YES - more money was introduced through the Trillion Dollar Cares Act, people had to save because there were fewer places to spend their money, low interest rates promoted more borrowing so people could have access to more money, the velocity of money dropped because that money wasn’t spent, and because of that - there was a large influx of money into SAVINGS AND CHECKING ACCOUNTS than we’ve seen during any other time in history. That’s why the money supply saw a HUGE initial increase.
Regardless, though - YES…a LOT of more money IS in circulation…a LOT of that was because people have fewer places to spend it, so they keep it in their accounts…and, until there’s sufficient demand - there’s not much concern for inflation. In the future, that might be a different story as stock and real estate prices continue to go up…but, at least now you know more about it, and how the supply of money affects you and your wallet.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

What's up, graham, it's guys here and i want to talk about something rather concerning that's been brought up a lot lately on my channel and that has to do with this statement here. 25 of all us dollars were created in 2020.. Now, usually, it's easy to hear something like this and then dismiss it as something your uncle larry would say over a thanksgiving dinner while talking about the great reset, but that statement usually doesn't do itself any justice without being accompanied by this graph here, which shows you, The m1 money supply, as you can see since the 1970s, the amount of money in circulation slowly increases year by year at a normal pace, but then we get to 2020 and boom. It immediately jumps up 20, nearly overnight and then again mid-november.

It suddenly jumps up. Another 10, seemingly out of nowhere so given how many people are bringing this up the confusion over what's really going on and how many people are concerned about the severity of having so much new money entering our economy. Let's talk about it i'll tell you! What's going on i'll, tell you whether or not this is something to be concerned with and then of course, what you could do about it and by the way there was a lot of time and research that went into making this video. So if you appreciate the information, it would mean a lot to me if you inflated that, like button by making it turn blue for the youtube algorithm.

That way, youtube knows to recommend this video to a brand new audience who could also smash the like button, and then we could slowly take over youtube with personal finance videos that help people make more money. So, thank you so much for doing that, and let's begin here all right so to understand. What's going on, you first got to understand this chart right here. This is called the m1 money supply.

Consider this kind of like your. I wish they taught this stuff in school lesson because seriously from all the stuff they taught us. This was left out, and arguably some of this is the most important information that we need to know, because it relates to our money that everyone uses in order to survive, but don't worry youtube to the rescue and we can just learn all this stuff here. So here's how all of this works anytime, we measure how much money is out there floating around from person to person we do so by calculating, what's known as the m1 m2 and m3 now i know it sounds like we're talking about bmws, but just think.

Instead, money, one money, two and money three and each of those - represents something different at first we have m0. This is the physical cash money out there that you might have in your pocket, hiding under the mattress or the money, i'm holding my hand or the money in a bank vault somewhere ready to be taken by the joker. Next, we have the m1 money supply, and this is the very spooky chart that i showed you at the beginning of the video. This represents a combination of all the money and checking accounts, as well as all the physical money that i mentioned in m0.
Next, we have m2 now this includes money sitting in savings accounts, money, market accounts or other accounts with less than a hundred thousand dollars that people don't use for day-to-day spending. This number also includes everything in m1, so you basically take m1. Add it to m2, and this is the number you get after that. Finally, we have m3 - this includes investment, accounts, retirement accounts and other long-term holdings that you would not necessarily spend immediately, but you could, if you really wanted to, and just like the others.

M3 also includes m2, which also includes m1, which also includes m0, so to break it down even further. Just think of it like this, if you have a hundred dollars in cash, a thousand in your checking 10 000 in your savings and a hundred thousand dollars in a retirement account, then m zero would be a hundred and one would be eleven hundred m. Two would be eleven thousand one hundred dollars and m. Three would be all of that combined at one hundred and eleven thousand one hundred dollars.

Each rating has a different classification as to how easily it could be spent and the closer it is to cash. The lower the number you're gon na have so once you understand that we need to finish this off with, what's known as the velocity of money, this tracks, how often that money is actually spent, and then how often it circulates throughout the entire economy, for example, if I spend ten dollars at a restaurant who then pays their server ten dollars, who then spends ten dollars at a grocery store? Who then spends ten dollars with their wholesaler to pay for more food? Who then pays ten dollars to the farmer who makes the food who then pockets the money and makes a yolo investment into gamestop? That works out to be a money velocity of five, because the money has changed hands five times. The velocity of money shows how willing people are to spend their money and generally the higher the velocity of money. The better our economy is doing because it's showing that that money is transferring from one person to another.

Well, as you can see right here, we have the lowest velocity of money in history, because people are not spending money. So, what's going on because here's where things start getting quite juicy, when you see a massive uptick in the m1 money supply or money and checking accounts, it doesn't necessarily mean that 25 more money was just magically printed out of thin air. Now sure some of it is absolutely created by multi-trillion dollar stimulus packages, but the rest of it might be a little less alarming. Now, initially, the largest shift of money into the economy was through the 2.3.

Trillion dollar cares act, so that's an easy one to display. On the graph, as we see right here, more money was created and leveraged as debt banks didn't have to keep as much money in reserves, so they could lend more money at a very low interest rate. More people were incentivized to refinance and borrow money because of it and overall that equated to more money in our economy. Now, normally, when this happens, we would see rampant inflation, but in this new economy, with everything closed down and nowhere to spend our money that money either sat around doing nothing as we could see by the velocity of money right here, which again is at its lowest Level in history or the money was invested, which might explain some of the hyperbolic growth of the stock market, but once we go into the few recent weeks where it seemed to have spiked suddenly without any warning whatsoever, before even another stimulus package was announced, we have To go into a few other potential causes.
First, there is a big shift of money that moved from savings accounts and into cash and checking accounts, or, to put it more appropriately, there's a big influx of money from m2 and into m1, where it could be spent more easily. The thinking was that this was around the same time where some mortgage forbearances would be expiring. We weren't sure if rental protections would be extended beyond december 31st and end of year. Financial obligations may have cost some money to move from m2 and back into m1 or basically money just moves from savings accounts into checking accounts or m2 into m1, and that shows up as a big blip right here now.

Second, it was also theorized that this might have something to do with the proposed tax changes on capital gains for people making over a million dollars a year. There have been quite a few proposals for tax increases and further taxes on inheritances and because of that, many wealthy people have shown an interest in planning for that ahead of time or cashing out now, when they know their capital gains are going to be at a Lower rate, the same thing could also be said about private equity firms or corporations who want to lock in a lower tax basis, just in case they end up going up now. Third, as more people save money and don't spend it, it's going to be reflected in the amount of money they have in their checking and savings accounts, and that would further inflate the number that you see here. After all, if you lost your job you're, getting unemployment and you're, not sure when you can start working again, chances are you're saving as much money as you can right now, and that money isn't flowing back through the economy like it normally would.

As we can see here from the chart, the personal savings rate has skyrocketed, the velocity of money is down and that could help boost up the m1 and m2 money supply or in other words overall, yes, more money was introduced through the trillion dollar cares package. People were then forced to save more because there were fewer places they could spend their money. Low interest rates promoted more borrowing, so people would have access to more money. Then the velocity of money dropped because people had nowhere to spend it, and because of that there was a very large influx of money into checking and savings accounts than during any other time in history.
This is why the money supply ended up. Seeing such a big increase this year, but the spike that we saw out of nowhere in the middle of november was not because the fed increased their balance sheet otherwise known as printing money, which, as we could see right here, has remained fairly constant. Instead, this was due to a large amount of money, moving from savings accounts and into checking accounts in cash. That would imply that people or institutions want more money available to them in cash at the end of the year.

For maybe some of the reasons i just discussed so that of course leads us to. What does this mean for all of us, and is this even a big deal to begin with? Well, the biggest concern people have when they see this is that their money is losing value through inflation. When there's such a large increase of money entering the economy, the go-to thought is that now our money is worth less, prices are going to be going up, and now we need to make more money to pay for the same things that we could buy a year Ago and they're somewhat right, the more money that's out there, the higher the likelihood that prices will end up going up. However, what makes this so unique is that with everything shut down, there's, actually not enough demand out there to create inflation for there to be inflation.

There actually has to be more demand to push up the cost and without it, prices would stay the same. For example, if the fed were to print two trillion dollars, but then go and put it all under a mattress. That's not going to cause inflation because there's no pressure to spend it at this point. What the federal reserve is desperately trying to avoid is deflation.

This means prices come down because there's less demand to buy them and over time your cash becomes more valuable. So then people start hoarding cash, causing prices to go down even further and then just starting the cycle all over again and when it comes to a recovering economy. That is not what we want. That's usually associated with an all-out depression, which is definitely not what any of us want.

So, in a way to jump start the economy more money can be introduced without creating inflation in the traditional spots that we see it now. The counter argument to this is that with everything shut down and know where to spend your money, where does all the money go, and in this case that could very well be in the stock market and in real estate, even though we might not see normal inflation? In the sense of going to the grocery store or going and buying clothes, we're certainly seeing higher prices in things like the stock market, real estate, gold, bitcoin or any other investment that people could stock money away with. Some of this might be in part due to the fed lowering interest rates to zero and creating a frenzy for people to borrow as much cheap money as they can, but some of it might also be in part to people having more money left over that they Would normally spend and because of that they have more money to invest. The only realistic concern that i see is that if demand comes surging back after all, this is over and interest rates are still near zero percent.
There could very well be an argument for inflation. I don't necessarily think there's going to be hyperinflation that would devalue our currency into pretty much nothing, but at this rate it's a little like picking between the lesser of two evils. Would you rather have deflation during a time where our economy is extremely fragile or the potential of future inflation? When things recover, i would argue that the potential for inflation in the future is a lot better than a strong likelihood of deflation today. So from that perspective, what we're seeing now is better kind of now in terms of what you could do about all this.

It's really rather simple. I think the only cash that you should really keep on hand is enough to cover a three to six month. Emergency fund, with money held within a high interest, savings account and enough in a checking account to cover your day-to-day expenses and then, of course, the rest of it should be immediately invested unless you're saving up for something in particular. The reality.

Is that long term, your money is going to be losing value over time it's how our economy was designed and even though some periods might lose value faster or slower than others. It's never a good idea to sit on too much cash for too long without investing it. Now, if we see inflation, that's typically going to boost up real estate and stock values. If you have a mortgage or a low interest rate loan, that loan is going to become a lot easier to pay off in the future with future dollars than it would be today.

So, unfortunately, inflation benefits those with assets and low interest rate debts like with mortgages on real estate, and it hurts everybody else who now needs to make more money to pay for those exact same things. Now, i'm not implying that this specifically is going to cause inflation. Like i mentioned, i think this has more to do with money, moving from savings to checking accounts than the fed just printing more money. But regardless of the reason, it's never a good idea to keep more cash than you need on hand without investing it long term.

So i hope this clears up any confusion. The next time you see anything about 25 of all currency printed in 2020, because sure there is some truth to that and there was a lot of money thrown at the economy to keep it running. Although more recently, the big jump in money supply has more to do with money moving from savings into checking than it does about the fed just magically printing, more money, tax changes, the end of forbearance and year-end tax changes could all play an effect on this, but It is unlikely that it was just another injection of money from the fed without any warning at all, regardless, though, yes, there is a lot more money in circulation. A lot of that has to do with people having fewer places to spend their money, so they just choose to keep it and until there's sufficient demand again we're unlikely to see inflation now in the future.
That might be a different story as stock and real estate prices continue to go up, but at least now you know more about it and how the money supply affects you and your wallet. So with that said, you guys thank you so much for watching. I really appreciate it as always make sure to destroy the like button subscribe button and notification bell also feel free to add me on instagram my poster pretty much daily. So if you want to be a part of it, there feel free to add me there.

As on my second channel, the gram stefan show i post there every single day - i'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that. And lastly, if you guys want four free stocks, use the link down below in the description and weeble is going to be giving you four free stocks when you deposit 100, on the platform with those stocks potentially worth all the way up to 1 600. So if you want those free stocks use the link down below at that point, it's pretty much like free money.

So if you want free money, use that link down below, let me know which stocks you get. Thank you so much for watching and until next time.

By Stock Chat

where the coffee is hot and so is the chat

35 thoughts on “Why i stopped holding cash”
  1. Avataaar/Circle Created with python_avatars Nicholas Walters says:

    Everyone mind should be pushing them
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  2. Avataaar/Circle Created with python_avatars Bathchy Mogul says:

    This is what I call Grace, After I lost my job and thought all hope was gone, I did not even know how to get money to payoff my bills because I was already living in debt's, till I saw testimonies about Mrs Annika Arno

  3. Avataaar/Circle Created with python_avatars Anna Winter says:

    The wisest thing that should be on everyone mind currently should be to invest in different stream of income that doesn't depend on the govt especially with the current economic crisis around the world.

  4. Avataaar/Circle Created with python_avatars Michael Smith says:

    The secret of your future is hidden in your daily routine. Successful people do daily what the unsuccessful only do occasionally

  5. Avataaar/Circle Created with python_avatars Rosa Bennie says:

    The secret of your future is hidden in your daily routine. Successful people do daily what the unsuccessful only do occasionally

  6. Avataaar/Circle Created with python_avatars Chris Pacheco says:

    “Hey what’s up graham it’s guys here”😂

  7. Avataaar/Circle Created with python_avatars D SMITH says:

    That was just trump having a few dollars printed up and sent to his personal vault before he left office.. won’t happen again.

  8. Avataaar/Circle Created with python_avatars Satoshi Stacker says:

    Nice video! I was able to build a big income stream during the covid 19 pandemic investing with a professional broker, Mrs Victoria Valle.

  9. Avataaar/Circle Created with python_avatars ALLDAYUBUM says:

    I always hated that guy who buys a newspaper and puts it on the credit card or buys a small coffee and uses his card and holds up the line. I get using a credit card but i always have cash for smaller things plus when a man buys a meal or takes his girl out its more manly to pay in cash.

  10. Avataaar/Circle Created with python_avatars clubracer6 says:

    Are you at all surprised by the amount of followers you have? It is good content and based on your delivery I assume you have a bit of a younger audience, so it is great that there is so much interest in what you’re talking about.

  11. Avataaar/Circle Created with python_avatars Cole Stiverson says:

    Thanks for being the high school teacher we all should have had!

  12. Avataaar/Circle Created with python_avatars J Brown says:

    Bitcoin and forex are more profitable with the favorable market rise

  13. Avataaar/Circle Created with python_avatars S says:

    Inflation is the increase in the currency supply. Higher prices are a symptom of inflation. It’s like a cough is the symptom of a cold. By then, you e already got it.

  14. Avataaar/Circle Created with python_avatars Linda Wang says:

    We learned about the M1, M2, and M3 money supplies in econ in high school! Stay in school kids.

  15. Avataaar/Circle Created with python_avatars Karen Kimberly says:

    l recommended a professional broker to you guys sometime ago, can I get person who invested with her
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  16. Avataaar/Circle Created with python_avatars Jose Duran says:

    "Whats up Grahm its Guys here" love this guy.

  17. Avataaar/Circle Created with python_avatars kim anh says:

    The physical cricket pivotally request because coat electrophoretically land beneath a lonely pajama. dispensable, grotesque farmer

  18. Avataaar/Circle Created with python_avatars Bradley Boulton says:

    "What's up Graham, it's guys here."

  19. Avataaar/Circle Created with python_avatars Greg says:

    What's up Graham, it's guys here! 😀

  20. Avataaar/Circle Created with python_avatars Squilliam Fancyson says:

    The important sex yearly shave because multimedia significantly remember times a slimy kitty. shrill, scarce airmail

  21. Avataaar/Circle Created with python_avatars bruce sanchez says:

    That 10 to one than another turns to zero because of taxes

  22. Avataaar/Circle Created with python_avatars Gray Bryan says:

    There are some arguments for holding more cash at the moment. The stock market could go way down. If you are holding cash, you have something to live on until the market recovers somewhat.

    Holding cash for stability isn't as costly when interest rates are this low (there are few alternatives). If you are retired or nearing retirement you might want more in cash. If the market declines you can buy more stocks at a lower price but only if you have some cash.

    You can sell stocks but you will pay taxes or you can hold on to most stocks and sell just a few and hold that as cash.

  23. Avataaar/Circle Created with python_avatars Greg Lewis says:

    I think fresh water, Helium and crude oil are very good trading cards of the future! I know I'm old, but nobody trades baseball cards like people in the 60s that put baseball cards in their bicycle spokes to make noise!🤔😆

  24. Avataaar/Circle Created with python_avatars Dark_Winter says:

    That's why you get a little gold and silver

  25. Avataaar/Circle Created with python_avatars Rob Edmund says:

    I ALWAYS hold cash…………until I see something I really like or want.

  26. Avataaar/Circle Created with python_avatars Greyson Jordan says:

    Thanks for this great video it has been helpful to us. Life could be easier if we meet the right people, I have made huge profit by investing with a professional broker Mrs Kramer Rosalina and now am growing financially.

  27. Avataaar/Circle Created with python_avatars Robin Toman says:

    Why did you ever start holding any cash you dont need for bills, food etc..?

  28. Avataaar/Circle Created with python_avatars AlienHawk Q says:

    Question: The number of businesses taking bitcoin is growing. There are several gold based credit/debit cards. What affect does the movement to gold and bitcoin for daily purchases affect the dollar?

  29. Avataaar/Circle Created with python_avatars Morgan Chinn says:

    Inflation IS happening, at an alarming rate. Asset inflation. You even admit it at the end of the video, hugely disappointing that you completely ignore this fact in the video

  30. Avataaar/Circle Created with python_avatars Denis K says:

    what's considered a high interest saving account? I mean what account doesn't pay in pennies in these days.

  31. Avataaar/Circle Created with python_avatars Mitch Gilbert says:

    I don’t believe in a cashless society, but cryptocurrency coexisting with cash solves this problem.

  32. Avataaar/Circle Created with python_avatars Quinn Danniels says:

    Getting rid of that M0 is one of the easiest changes to make. While keeping cash is a great way to not overspend, investing that money can go a long way.

  33. Avataaar/Circle Created with python_avatars frank carlos says:

    he doesn't know the difference between money and currency

  34. Avataaar/Circle Created with python_avatars Dylan Labadia says:

    Review my channel! @Dylan365 I posted a video every single day for a full year. Rip apart or promote as you wish I respect your insight!

  35. Avataaar/Circle Created with python_avatars G F says:

    I’m going to regurgitate this to my co workers so they think I’m a genius 😂😂😂

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