The definition of broad money is the assessment of a country or market’s money supply. An understanding of broad money can be very useful when determining which markets or currencies to invest in.
Calculating broad money is very complex and involves ascertaining the amount of currency that is in public circulation in a given country. Public notes are also considered in broad money and this includes notes held by banks and trusts.
There are two categories used to group the financial assets of broad money. The first grouping is known as M1. M1 includes such things as checking account balances, cash in public circulation, and traveler’s checks. M2 is the second category and include liquid assets. These two groups can be used to predict economic factors like inflation.
Broad money can be used as an indicator in determining which markets to invest in. It can determine the strength of markets and countries that can guide smart investments.