Part 2/10:
The money supply is a vital tool used to gauge economic vitality. It is primarily tracked through two measures: M1 and M2.
M1 includes cash, coins, and checking deposits—funds that are immediately accessible for transactions.
M2 broadens this scope to include savings accounts, money market accounts, and certificates of deposit under $100,000, representing assets that are less liquid but still significant.
When the growth of these measures slows down or contracts, it often indicates that the economy is poised for a slowdown or recession. Historically, a contraction in M2 has been a rare event, occurring only four times in the past 150 years, making the current decline a particularly noteworthy phenomenon.