Total Australian Credit

$7,395,866,900,920

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Total Australian Credit outstanding includes all debt and equity outstanding of the domestic non-financial sectors.

Total Australian Credit has grown from AU$787.7 billion in December 1989 to AU$6.3 trillion in December 2016; an increase of a little over 800% over a 27 year period.


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Money

 

 

Helping Australian’s gain a greater understanding around the circumstances of money and debt in the Australian economy in order to prepare and endure the next financial crisis.


 

‘It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.’ 

-Henry Ford-

Today it is more important than ever to understand banking and the monetary system. In order gain this understand, one first needs to recognise that money has different values depending upon which instruments you account for as money. Money at a base level is quantifiable as the amount of Currency.

Money : Currency

Currency includes all notes and coins printed by the Royal Australian Mint under the directive and guidance of the Reserve Bank of Australia. Currency is defined in the RBA as ‘comprising holdings of notes and coins by the private non-bank sector.’ This measure of money is the most liquid form of monetary assets.

The chart below shows the volume of currency in the Australian economy over time since July 1959.

Money : Currency

$75,319,892,747

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AUD

 

Currency as defined in the RBA as ‘comprising holdings of notes and coins by the private non-bank sector.’

From January 2008 currency volume increased by over 70% from $39.4 Billion to $72.3 Billion. The volume of available currency is increasing at an increasing rate to provide the liquidity needed to support Total Australian Credit and Debt, which is also increasing at an increasing rate.

Currency is the most liquid measure/classification of money.

Under a credit based monetary system (like that of Australia and most other free market/capitalist economies in the modern world), money has a different value depending on the scope at which it is measured. At the narrow end of the spectrum money is simply currency, but at the wider end of the spectrum money includes all the outstanding ‘I owe yous’ (IOUs) layered on top of liquid currency. Most of these IOUs exist in banks that are licensed to leverage your deposits by way of loans to other account holders. The banking process of creating loans in turn creates deposits (through double entry book keeping in the bank system) and money (albeit, leveraged broader money – on the wider end of the spectrum) is created.

The next measurement of money is M1.

Money : M1

M1 can most simply be classified as currency plus short-term liabilities for banks (your deposits in banks show up as liabilities on their balance sheet – it loans that are assets for banks).

The RBA defines M1 money as; ‘‘M1’ is defined as ‘Currency’ plus ‘Current deposits with banks’.’

Money : M1

$358,110,355,445

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AUD

 

M1 classification of money is defined by the RBA as; ‘‘M1’ is defined as ‘Currency’ plus ‘Current deposits with banks’.’

The next classification is M3 in Australia.

Money : M3

M3 in simple terms is M1 plus long-term liabilities for banks (remembering, your deposits are liabilities for the banks).

The RBA defines M1 money as; ‘‘M3’ is defined as ‘M1’ plus all other deposits at banks (including certificates of deposits) from the private non-ADI sector, plus ‘Deposits with non-bank ADIs’.’

Money : M3

$2,212,582,114,900

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AUD

 

The RBA defines M1 money as; ‘‘M3’ is defined as ‘M1’ plus all other deposits at banks (including certificates of deposits) from the private non-ADI sector, plus ‘Deposits with non-bank ADIs’.’

 

Next is the widest measurement of money in Australia, Broad money.

Money : Broad money

Broad money is the widest/most leveraged measure of money in the Australian economy, measured by the Reserve Bank of Australia.

The RBA defines Broad Money as; ‘‘Broad money’ is defined as ‘M3’ plus ‘Other borrowings from private sector by AFIs’.’

Money : Broad Money

$2,217,425,931,900

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AUD

 

The RBA defines Broad Money as; ‘‘Broad money’ is defined as ‘M3’ plus ‘Other borrowings from private sector by AFIs’.’

The you have it, most money that exists in your bank accounts today is directly attributable to the historical growth of mortgage loans from Australian banks. And where money was once back by gold (President Richard Nixon ending this in 1971 – though central banks still hold onto their gold reserves…), dollars are now solely backed by confidence.


 

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.