Securities Issued The Money Supply

Development of securities business impacts deeply on the modern economy, which already have been researched by many scholars. However, the problem of impact of securities issue on money supply hasn't been studied in detail. As a result, a lot of the phenomena of economy can't be interpreted and economy policy be harmed in somewhat degreed. Therefore, this paper researched the issue, uncovered the relation between securities issue and money supply and analyzed the impact of the relation on the modern economy. Subsequently, this paper educed a model of supply and demand of money increment which summarized and developed the fore studies. At the beginning, this paper reviewed the creating process of the modern credit money, analyzed the channel of money supply. Whereafter, the circulation process of commodity and money in the modern society was analyzed and a conclusion was drew that the higher savings ratio of residents, the more the supply of money was and the larger the scale of securities issue, the smaller the supply of money was. Then, this paper employed international and domestic data to test the conclusion. With international data, the data of M2/GDP, scale of securities issue and savings ratio of residents was collected from 27 countries which economy status had been steady. The test proved the conclusion. The domestic year data of loan scale (loan increment/GDP), scale of securities issue and savings ratio of residents was analyzed from 1992 to 2003. The conclusion was proved also. Based on the conclusion, the economy phenomena of on and require about money supply, new economy of America and bad debt of bank was analyzed and new viewpoints were brought forward in the paper. As a sum-up and development of the paper, a model of supply and demand of money increment was educed which opened out the connection of economic growth rate, savings ratio of residents, change of foreign exchange reserve, direct finance, indirect finance, money increment and interest rate. The model provided us a tool of analyzing change of money increment. Finally, a suggest was given that securities market should be perfected to heighten scale of securities issue and system of social security should be improved to reduce savings ratio of residents as soon as possible in order to keep growth rate and stability of our economy.