Abstract：It is not appropriate to substitute M2/GDP for the Financial Interrelations Ratio(FIR) proposed by Raymond W. Goldsmith. FIR is mainly used to indicate the degree of financing through the market. It is concluded that M1 and GDP are closely related, since the growth of M1 from 1992 to 2012 in China is accommodated to the growth of economy and price, so there is no so called currency over-issuance, but the quasi-money is over-issued. We should distinguish between money and quasi-money, and focus on the correlation between storage and investment, money, substitutes of money, and the substitution relationship between quasi-money and securities.
Keyword: FIR, M2/GDP, Excess Supply
source:Finance & Trade Economics ,No2,2014