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Money supply and fertility rate

发表时间：2026-08-09 10:51

Money supply and fertility rate

The following table is the top ten countries ranking by M2/GDP ratio. Countries with population less than ten million are excluded to reduce the impacts of financial centers. We also list their corresponding fertility rates

Rank	Country / Territory	M2 / GDP Ratio (%)	Total fertility rates
1	Japan	~280%–300%	1.2
2	China	~220%–240%	1.0
3	Taiwan	~170%–185%	0.86
4	United Arab Emirates	~150%–165%	1.2
5	Vietnam	~140%–150%	1.9
6	Thailand	~135%–145%	1.2
7	United Kingdom	~130%–145%	1.6
8	South Korea	~130%–140%	0.72
9	Malaysia	~125%–135%	1.6
10	Canada	~120%–130%	1.3

Fertility rates are quite low in most of these countries. It is not a good idea to print money to boost fertility, as suggested by some economists. In high money supply countries, housing price is high and capital valuation is high. This makes it difficult for young families to own houses and to start new businesses, thus reducing fertility. High money supply also increase government power and the power of large businesses. So power and wealth are more concentrated into a small minority, thus reducing fertility.

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jingchen：
14:35
Who benefit or hurt from high M2/GDP policy?
Because a high $\text{M2}/\text{GDP}$ ratio is an outcome of a country's financial structure and central bank lending policies rather than a single explicit policy knob, the winners and losers depend heavily on how that high ratio was generated (e.g., massive bank-financed state credit, prolonged quantitative easing, or trade surplus accumulation).
Key Winners
1. Commercial Banks & Financial Intermediaries
A high $\text{M2}/\text{GDP}$ ratio indicates that an economy funds itself primarily through commercial bank deposits and loans rather than capital markets.
Benefit: Commercial banks sit at the absolute center of national wealth accumulation. They collect massive deposit bases, generate revenue on net interest margins, and enjoy strong institutional backing from central banks, which view them as "too big to fail" systemically.
2. Heavily Indebted Corporate Borrowers & State-Owned Enterprises (SOEs)
In economies like China, South Korea, or Japan, high $\text{M2}/\text{GDP}$ is driven by vast corporate and property loans.
Benefit: State-backed or large corporate entities get cheap, continuous access to bank credit to expand operations, build infrastructure, or roll over existing debt. Because bank credit creation generates new $\text{M2}$ deposits, these institutions receive fresh capital before it circulates into broader price inflation.
3. Asset Owners (Real Estate & Equities)
When central banks and commercial banks expand money supply ($\text{M2}$) faster than real economic output ($\text{GDP}$), excess liquidity frequently leaks into non-$\text{M2}$ financial assets.
Benefit: Property developers, homeowners, and equity investors see asset prices inflate. In low-fertility East Asian economies (e.g., China, South Korea), bank credit expansion has historically flowed heavily into urban real estate, benefiting existing property holders.
4. Governments Seeking Low Borrowing Costs
When a banking system is flooded with liquid deposits ($\text{M2}$), local banks are incentivized to buy government bonds at low yields.
Benefit: Governments (such as Japan’s) can run exceptionally high public debt-to-GDP ratios without facing sudden sovereign debt crises, because domestic commercial banks use their vast deposit bases to absorb government debt.
Key Losers
1. First-Time Homebuyers and Young Generations
When bank credit creation drives up real estate valuations while wages grow only at the rate of nominal $\text{GDP}$, housing affordability collapses.
Harm: In high $\text{M2}/\text{GDP}$ nations like South Korea, Taiwan, and China, young adults face extreme price-to-income ratios for housing. This affordability crisis is widely cited as a major contributor to the collapsing fertility rates in these regions.
2. Conservative Savers (Cash & Deposit Holders)
A high $\text{M2}/\text{GDP}$ ratio often reflects financial repression—where central banks keep interest rates low to support massive bank balance sheets.
Harm: Households holding traditional bank savings accounts or cash earn real interest rates that trail asset inflation, steadily diluting their purchasing power relative to physical assets and real estate.
3. Small-and-Medium Enterprises (SMEs) & Non-Favored Sectors
In state-directed, bank-centric economies with high $\text{M2}/\text{GDP}$ ratios, commercial banks overwhelmingly allocate new credit to large corporations, state enterprises, or real estate collateral.
Harm: Independent entrepreneurs, tech startups, and small businesses are often squeezed out of the banking system, facing credit rationing because they lack the massive physical collateral demanded by traditional commercial banks.
4. Foreign Investors Subject to Capital Controls
Countries maintaining very high domestic $\text{M2}/\text{GDP}$ ratios (such as China) often implement strict capital controls to prevent domestic liquidity from fleeing abroad.
Harm: Citizens and businesses face restrictions on moving their capital internationally, locking savings inside the domestic banking system to maintain state-directed financial stability.Summary Comparison
Group
Primary Impact
Outcome
Commercial Banks & SOEs
Direct access to newly created bank credit
Winner
Asset & Property Owners
Benefit from excess liquidity inflating asset prices
Winner
Governments
Enjoy low domestic borrowing costs
Winner
Young / Non-Homeowners
Priced out of real estate by credit-driven asset inflation
Loser
Cash / Bank Savers
Yields suppressed below asset/living cost inflation
Loser
Innovators & SMEs
Starved of credit in favor of legacy corporate borrowers
Loser

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