I was watching a video about how money gets its value. They say the answer has to do with how much money is in circulation. But how does one find out how much money there is in circulation as set by the Fed?


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The video gives the impression that the Fed "sets" the money supply. However this is not true at all. Surprisingly the money supply is mostly determined by private banks and the amount of lending that they do. The Fed then has some things it can do to influence the money supply. It's a system called fractional reserve banking and its very hard to get your head round. For a less technical explanation, watch this.

You will learn that there is more than one possible definition of "the money supply" (M1, M2 etc). The amount of each can be found at the St Lois Fed website - try doing a search for "money".


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