What is Money Zero Maturity?

Money of Zero Maturity (MZM) is a measure of the liquid money supply within an economy. MZM represents all money in M2 less the time deposits, plus all money market funds. For money to be included in MZM it has to be redeemable at par value, which is why money in time-related deposits are not included in MZM.

Understanding Money Zero Maturity (MZM)

MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. Furthermore, the Federal Reserve stopped tracking M3 in 2006. This measurement derives its name from its mixture of all the liquid and zero maturity money found within the three M's. MZM includes money in all of the following:

  • Physical currency (coins and banknotes)
  • Checking and savings accounts
  • Money market funds

Economists and central bankers use MZM along with the velocity of MZM to better predict inflation and growth, because, the more funds readily available, the more money there is to spend, which can be a sign of inflationary pressures. 

According to data from the St Louis Fred, total MZM in the U.S economy first passed $1 trillion in 1982, and at the turn of the 20th century was $4.4 trillion. By 2008, preceding the Great Recession, the total MZM was $8.2 trillion, and as of December 2017, it had reached $15.2 trillion.