Last time we looked, the M1 was around $1.2 trillion; the M2, $6 trillion; and the M3, $8.8 trillion. The Fed, by daily manipulation, can alter these numbers. If the Fed releases less money into the economy, interest rates rise, corporate America borrows and produces less, workers are laid off, a...

By the Fed’s definition, the narrowest measure:

1. M1, is restricted to the most liquid kind of money-the money you’ve actually got in your wallet (including traveler’s checks) and your checking account.
2. M2 includes M1 plus savings accounts, time deposits of under $100,000, and b...

When the Fed tightens, interest rates rise and the economy slows down. When the Fed eases, interest rates fall and the economy picks up. Or so it used to be. The balancing act is so difficult, and the Fed so mistrusted, that its actions often have a perverse effect. So much for simplicity. Many s...

MONEY SUPPLY: This is what the Fed is supposed to control but has a hard time doing. For decades, the Fed, and the people who make a living analyzing what money is doing, monitored the money supply because of the effect it was believed to have on the national economy.

The F...

MACROECONOMICS VS. MICROECONOMICS: Further evidence of the tendency of economists to see things in pairs.

Here, “macro” is the side of economics that looks at the big picture, at such things as total output, total employment, and so on.

“Micro” looks at the small pi...

ECONOMETRICS: Yesterday’s high-level hustle. Econometrics used to mean studies that created models of the economy based on a combination of observation, statistics, and mathematical principles. In the Sixties, however, the term referred to a lucrative mini-industry whose models w...

Government, in fact, soon became the biggest investor in econometrics models, spending millions to equip various agencies to come up with their own, usually conflicting, forecasts-this, despite the fact that the resulting predictions tended, throughout the Seventies, to have about the same record...

The first economist, this Adam Smith was an actual person, not some contemporary telejournalist’s pseudonym. His historic book, an Inquiry into the Nature and Causes of the Wealth of Nations (1776), propounded the idea that competition acted as the “invisible hand,” serving to regulate the marke...

MARKET FAILURE: This is one of a number of terms that economists use to put down the real world. Here’s the way it works:

• When things don’t go the way economists want them to, based on the laissez-faire system (see above), the outcome is explained as the result of a “m...