I've read lots and lots of articles about why and when China will crash, the #1 reason is M2 oversupply in China, compared to the M2 in US. However this is totally B.S. and comparing apple to orange. Here's why:
There are different measures to gauge the money supply.
M1/M2/M3/L
M1: currency in circulation; commercial bank demand deposit; ATS; credit union share draft; savings bank deposit; traveler checks
M2: M1 + overnight purchase agreement issued by commercial bank; overnight Euro Dollar; savings account; CD under $100k; money market mutual fund
M3: M2 + CD over $100k, term purchase agreement
L: M3 and other liquid assets: Treasury bill, savings bonds, comercial paper, bankers acceptance, Euro Dollar holdings of US resident in none banks
From above, you can clearly see using M2 to represent the money supply and comparing liquidity in circulation is grossly misleading.
Since FED stopped publish M3 number (you have to ask why), we can only find unofficial number from Shadowstats.com that indicates M3 is close to 11 trillion dollars.
In addition, we are not counting L which include treasury bills and saving bonds. Those are liquidities that can flow to M2 any time if the holder cash them out.
With Stock capitalization in China is much smaller than US', bond market is also no comparison with US'. Euro Dollar worldwide is huge, plus the shadow banking system's derivatives is sky high, I do not think the author is comparing apple to apple thus the conclusion may be drastically overstated.
