The total stock of money is the sum of money plus money substitutes. The total stock of money and the total demand for money determine the purchasing power of money or the array of prices. In the last few years, the total stock of money has been increasing significantly, but the total demand for money has also been increasing. The result has been a modest, but significant increase in prices.
The monetary aggregates computed by the government are M1, M2, M2 – small time deposits, MZM, and M3 (discontinued). M1 is too narrow, excluding deposits that banks redeemable on demand at par. M2 is too broad, including small time deposits, which banks do not redeem on demand at par. MZM is too broad, including money market funds. M3 is much too broad, including large and small time deposits.
In the current reflation engineered by the Fed, credit expansion has been going into stocks and real estate instead of large time deposits at banks.
From 1/1/2010 to 9/1/2013:
M2-STD has increased 29 percent from $7,275.5 billion to $10,215.2 billion.
M2 has increased 28 percent from $8,432,8 billion to $10,770.4 billion.
M3 has increased around 1 percent from roughly $15,000 billion to $15,200 billion.