Much other credit=money is also secured against assets, and again, is not actually in circulation, but is "static".

All money except fiat currency itself is secured against assets ... but the speed of the velocity of a certain type of commercial bank liability that can be used, in some transaction, as money is entirely a matter of flows.

A money stock exists at a point in time. If we could take a snapshot of all commercial bank balances at a point in time, and add up the total bank liabilities that function as money at that point in time, that is the stock of money.

A monetary flow exists through time ... it is a count of a number of monetary transactions that occur within some period. The "static" idea above is simply a flow of zero, which is certainly possible for some commercial bank liabilities that function as money, especially for short periods such as a month or a week.

But At All Times in a reserve banking system, barring shenanigans in which an insolvant bank is being temporarily hidden from the bank examiners, total commercial bank assets equal total commerical bank liabilities, with the account liabilities that function as money providing the lion's share of the money supply, and fiat currency in circulation (rather than held by commercial banks as assets) providing the remainder of the money supply.

That supply is a stock. There is no necessity for the stock to increase in size in order for the total amount of monetary transactions in a period to increase, since the average velocity of circulation of a unit of currency can increase instead.

However, since commercial banks create additional purchasing power as an immediate side-effect of extending new credit (and with nothing whatsoever to do with the need to allow interest to be paid), money stock broadly measured does tend to move with the income-expenditure cycle that is in part driven by that extension of new credit.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.