I am no economist, so I find the concepts of M1, M2 ... M4 a little tough to understand. However, based on my own thoughts, I have come up with a new kind of money supply classification - that of fast money and slow money (which overlap but are the same as private and public money).
Slow Money can be defined as money kept in form of long term reserves and used for projects with long gestation periods having assured but low rate of return. Typically, this is money kept in Fixed Deposits, Savings Bonds or other forms of Government borrowings. Such money is often used by the Government or its agents to build infrastructure or institutional framework for the country.
Fast money is typically investor money - invested in ventures with potentially high returns but as much higher risk and with short to medium term return cycle. Such money - as is obvious from its definition - is typically invested in equity or other risky assets like venture capital funds, usually used for ventures whose sustenance may not be assured but could potentially give very high returns.
It may be easy to confuse slow money with public money and fast with private, however - while there may be a lot of overlap - these are not exactly corresponding terminologies. For example, private equity invested in huge infrastructure projects like refineries or utilities may be slow money. The investors in such projects do not intend to withdraw their equity for a long time, but at the same time may not expect the same rate of returns which they expect for other investments.
The central idea in defining these monies is to emphasize that an economy needs both Slow as well as Fast money to grow. Fundamentally - slow money contributes towards increase in the standard of the economy/country as a whole while fast money contributes towards increasing the standard of individual citizens/investors.
Excellent post. Nice way to make people financially literate.
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