<blockquote>
<p>My first doubt is the following: according to the balance, M2 &lt; total assets? Because it is not, why this happens?</p>
</blockquote>
<p>M2 is not in its entirety part of Fed's balance sheet. As an example M2 consists of deposit accounts in private banks. So M2 does not need to be less than total central bank assets. In fact it would be quite surprising if data showed that M2&lt;CB Assets.</p>
<blockquote>
<p>So in the case of the European Central Bank, the printed circulating money is more than the total assets. Why? How is it possible? What's the point I'm missing? What's the right calculation I should do?</p>
</blockquote>
<p>Regarding M2 again, M2 does not measure  how much money central bank <em>directly</em> creates. Central banks won't carry on their balance sheet money created by private lending even if the extra money creation was caused by CB issuing more high powered money. Also nowadays they do it electronically but you can think of it as money printing if that is easier analogy.</p>
<p>Regarding M0, I don't know how you got data on that since in EU we do not use M0. In EU we use measures M1, M2 and M3 (see <a href="https://www.ecb.europa.eu/pub/pdf/other/ecb.manualmfibalancesheetstatistics201901%7Ed2ebf72987.en.pdf?7387f911ffbc48fa536a5e61bbd2ce49" rel="nofollow noreferrer">ECB</a>). M0 is used in US and in couple of different countries (e.g. India) but not in EU. So I am not sure what did you classify as M0 when it comes to Euro-zone. Perhaps again there would be some items that do not belong to ECB's balance-sheet.</p>
<p>In any case lets pretend that the M0 in EU is 11704 billions of \$ and that it is composed of things that are solely at the ECB's balance sheet. Issued money are liabilities for central bank and central bank can operate with negative equity.</p>
<p>Central banks are not private business, they do not need to have retained earnings, profits to satisfy shareholders and they cannot ever run out of money.  ECB could operate with <span class="math-container">$A&lt;L$</span> and simply having negative equity.</p>
<p>However, again I wonder how did you actually calculated M0 for ECB. When you look at ECB's <a href="https://www.ecb.europa.eu/pub/annual/balance/html/index.en.html" rel="nofollow noreferrer">balance sheet</a> notes in circulation are much smaller than assets.</p>

CC BY-SA 4.0
2022-11-25T08:14:07.577Z
I've got the data about Euro Area from here: https://tradingeconomics.com/euro-area/indicators Actually you're right, there is only M1 and not M0 for ECB. I converted 11704 bill€ to roughly 11704bill$
SPS
CC BY-SA 4.0
2022-11-25T00:43:48.887Z
2022-11-25T00:43:48.887Z
1muflon1
<p>I've compared the central bank balance sheets of many countries and I've found some numbers strange for me. The balance sheet of a central bank should include all the assets on one side and all the equity and liability on the other side (resources).</p>
<div class="s-table-container">
<table class="s-table">
<thead>
<tr>
<th>Assets</th>
<th>Resources</th>
</tr>
</thead>
<tbody>
<tr>
<td>Gold reserve</td>
<td>currency in circulation</td>
</tr>
<tr>
<td>Treasury securities</td>
<td></td>
</tr>
<tr>
<td>Mortage-backed securities</td>
<td></td>
</tr>
</tbody>
</table>
</div>
<p>So, if the assets and resources should balance, parts of resources should be less than the total assets and vice versa.
On this <a href="https://tradingeconomics.com/united-states/central-bank-balance-sheet" rel="nofollow noreferrer">web site</a> I find:</p>
<ul>
<li>a total asset for the FED balance sheet of ~8676 billions of \$,</li>
<li>while M0 is 5410 billions of \$ and</li>
<li>M2 is 21503 billion \$</li>
</ul>
<p>My first doubt is the following: according to the balance, M2 &lt; total assets? Because it is not, why this happens?</p>
<p>Then I read also the balance sheet of the EU Central Bank:</p>
<ul>
<li>total asset: 8764 billions of \$ (I converted all the values to \$)</li>
<li>Money Supply M0: 11704 billions of \$</li>
<li>Money Supply M2: 15397 billions of \$</li>
</ul>
<p>So in the case of the European Central Bank, the printed circulating money is more than the total assets. Why? How is it possible? What's the point I'm missing? What's the right calculation I should do?</p>

CC BY-SA 4.0
2022-11-25T00:34:46.277Z
M2 is almost entirely unrelated to the central bank balance sheet as you can see [here](https://economics.stackexchange.com/a/49858/37817) for example. What exactly do you try to do because you ask what the right calculation is? To infer M2 from central bank money is impossible.
AKdemy
CC BY-SA 4.0
2022-11-25T01:00:05.100Z
For the EU, the NCB and the ECB [us an allocation key](https://www.legislation.gov.uk/eudn/2020/141/2020-12-31/data.xht?view=snippet&wrap=true) for currency. It's no surprise it doesn't match the ECB balance sheet.
AKdemy
<currency><money-supply><central-banking>
Central bank balance sheets and money supply balances
SPS
# Central bank balance sheets and money supply balances

(Asked by: username_0 on 2022-11-24)

I've compared the central bank balance sheets of many countries and I've found some numbers strange for me. The balance sheet of a central bank should include all the assets on one side and all the equity and liability on the other side (resources).

| Assets | Resources |
| --- | --- |
| Gold reserve | currency in circulation |
| Treasury securities |  |
| Mortage-backed securities |  |

So, if the assets and resources should balance, parts of resources should be less than the total assets and vice versa.
On this [web site](https://tradingeconomics.com/united-states/central-bank-balance-sheet) I find:

* a total asset for the FED balance sheet of ~8676 billions of \$,
* while M0 is 5410 billions of \$ and
* M2 is 21503 billion \$

My first doubt is the following: according to the balance, M2 < total assets? Because it is not, why this happens?

Then I read also the balance sheet of the EU Central Bank:

* total asset: 8764 billions of \$ (I converted all the values to \$)
* Money Supply M0: 11704 billions of \$
* Money Supply M2: 15397 billions of \$

So in the case of the European Central Bank, the printed circulating money is more than the total assets. Why? How is it possible? What's the point I'm missing? What's the right calculation I should do?

**Tags:** currency, money-supply, central-banking

> **Comments:**
> **username_1**: M2 is almost entirely unrelated to the central bank balance sheet as you can see [here](https://economics.stackexchange.com/a/49858/37817) for example. What exactly do you try to do because you ask what the right calculation is? To infer M2 from central bank money is impossible.  
> **username_1**: For the EU, the NCB and the ECB [us an allocation key](https://www.legislation.gov.uk/eudn/2020/141/2020-12-31/data.xht?view=snippet&wrap=true) for currency. It's no surprise it doesn't match the ECB balance sheet.  

---

## 1 answers

### Answer by username_2 on 2022-11-25. Score: 2

> My first doubt is the following: according to the balance, M2 < total assets? Because it is not, why this happens?

M2 is not in its entirety part of Fed's balance sheet. As an example M2 consists of deposit accounts in private banks. So M2 does not need to be less than total central bank assets. In fact it would be quite surprising if data showed that M2<CB Assets.

> So in the case of the European Central Bank, the printed circulating money is more than the total assets. Why? How is it possible? What's the point I'm missing? What's the right calculation I should do?

Regarding M2 again, M2 does not measure how much money central bank *directly* creates. Central banks won't carry on their balance sheet money created by private lending even if the extra money creation was caused by CB issuing more high powered money. Also nowadays they do it electronically but you can think of it as money printing if that is easier analogy.

Regarding M0, I don't know how you got data on that since in EU we do not use M0. In EU we use measures M1, M2 and M3 (see [ECB](https://www.ecb.europa.eu/pub/pdf/other/ecb.manualmfibalancesheetstatistics201901%7Ed2ebf72987.en.pdf?7387f911ffbc48fa536a5e61bbd2ce49)). M0 is used in US and in couple of different countries (e.g. India) but not in EU. So I am not sure what did you classify as M0 when it comes to Euro-zone. Perhaps again there would be some items that do not belong to ECB's balance-sheet.

In any case lets pretend that the M0 in EU is 11704 billions of \$ and that it is composed of things that are solely at the ECB's balance sheet. Issued money are liabilities for central bank and central bank can operate with negative equity.

Central banks are not private business, they do not need to have retained earnings, profits to satisfy shareholders and they cannot ever run out of money. ECB could operate with $A<L$ and simply having negative equity.

However, again I wonder how did you actually calculated M0 for ECB. When you look at ECB's [balance sheet](https://www.ecb.europa.eu/pub/annual/balance/html/index.en.html) notes in circulation are much smaller than assets.

> **Comments:**
> **username_0**: I've got the data about Euro Area from here: https://tradingeconomics.com/euro-area/indicators Actually you're right, there is only M1 and not M0 for ECB. I converted 11704 bill€ to roughly 11704bill$  

---

