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How much money is there?
January 26, 2006 11:28 PM   Subscribe

Some friends and I had a rather long, somewhat alcohol-fueled debate and could come to no real conclusion to the question "how much money is there in the world"?

We realized early on that we'd have to make sharp definitions as to what "money" really is: paper money and coins, electronic funds, stocks, assets, etc. One friend was sure that all the cash (money and coins) added together would only total about 5% of the total. Can anyone verify this? And if a very small number of people suddenly had all the money, wouldn't that make it essentially valuless unless it was given back to a large number of people?
posted by zardoz to Work & Money (19 answers total) 1 user marked this as a favorite
 
Using the numbers from the wikipedia money supply entry, the ratio of actual physical U.S. coins and banknotes in circulation (M0) to the broadest of the U.S. money supply measures (M3) is 7%. If one calculated a similar ratio for the world as a whole, it probably would be of similar scale.

For more information, see the earlier AskMe thread: How much money is there?
posted by RichardP at 11:50 PM on January 26, 2006


I was going to ask a very similar question: How much wealth is in the US? Knowing that some of the world's wealthiest people live in the US, I'd like to know how much "buying power," so to speak, the entirety of the US has.

But that's a threadjack, and that's bad.

Still answers to both our questions would be fantastic. (Although RichardP hits the money supply one pretty spot on.)
posted by disillusioned at 1:48 AM on January 27, 2006


I remember Noam Chomsky saying something to the effect that the same money used to buy stuff on the Tokyo stock exchange is used, twelve hours later, to buy stuff on the New York Stock Exchange. I still have trouble wrapping my brain around this.
posted by Clay201 at 2:12 AM on January 27, 2006


Are all ecconomies linked to gold reserves?

If so it would be (potentially) possible to calculate the approximate value by multiplying the qorldwide gold reserves and multiplying by the value.
posted by twine42 at 2:33 AM on January 27, 2006


The CIA say that it's about $59.38 trillion

aka

$5.93800 × 10^13

or

$59,380,000,000,000 (I think that's right)

or

152,647,815,000,000 Big Macs
posted by public at 2:40 AM on January 27, 2006


Well I totally shifted the decimal point in that last one......

15,264,781,500,000 Big Macs
posted by public at 2:45 AM on January 27, 2006


public wrote: The CIA say that it's about $59.38 trillion

While an interesting figure, I don't think the world's GDP is directly relevant to either of zardoz's questions. GDP is a measure of goods and services produced produced over a specified period (usually a year). It isn't a measure of the size of world's money supply or a measure of the total value of the world's assets.
posted by RichardP at 3:12 AM on January 27, 2006


RichardP: That's a good point, it was the closest figure I could think of that was vaguely relevant. Puts a minimum limit on the amount of money there is in the world though surely? In fact I would expect the 2 to be linked, surely a certain percentage of the available money is always going to end up being invested and so have an impact on GDP?

Oh, is anyone else confused by the bit on the CIA page where it says the world has $12.7 trillion of debt owed to "nonresidents"?

Alien loan sharks?!
posted by public at 3:54 AM on January 27, 2006


Given the propensity to invest money into non-cash systems in U.S. culture and both the (somewhat anecdotal) distrust of banks and the (plausible) lack of sound investment institutions in less economically developed countries, I imagine that the world wide cash percentage is above the U.S.'s 7%.
posted by oddman at 6:15 AM on January 27, 2006


This question can be interpreted in many different ways. There are multiple definitions for 'money', and many people confuse money with 'wealth', which is quite different.

Modern money has no inherent value. No remaining government backs its currency with any kind of commodity. The US Dollar, in other words, is a politician's promise to pay absolutely nothing on demand. It's one of the few promises you can count on them to keep.

'Wealth' is quite different. It's measured in 'useful things', not in dollars. ("capital", actually... of which "money" is just one component, and only in the sense that it can be traded for 'real' capital.) It's very hard to quantify, because it's more or less useful at different times and places. A factory to make iPods in the US could be worth billions. If the only market was in sub-Saharan Africa, it probably wouldn't be worth much. A shoe factory would be much more useful, and therefore more valuable.

In other words, the question 'how much wealth is in the world' is a very interesting one, and it would probably take a long time to answer, if it could be answered at all.

You'd think the 'simpler' question of how much money exists would be a purely numerical exercise, but you'd be mistaken there too. 'Money' can be a lot of different things.

Very frequently, things that are denominated in currency are treated like money. If a bank lends you $500, you have $500, and the bank THINKS it has $500, because you owe it that money. In fact, your loan is an asset and stays on their books as such; your loan is part of their reserves. So the same 'money' gets counted twice.

Likewise, many people think of stock portfolios as 'money'. Some folks even think of houses as 'money' since they're so easy to sell these days (or take out new loans on.) Government bonds feel like money, even though they probably aren't. You can exchange them for money, but they're probably not money themselves. That said, I think the experts may disagree with me. Bonds may be included in one of the broader definitions of money, perhaps M3. (I'd have to look it up.)

In other words, economists have been arguing about exactly what money IS for a really long time, and while they have fairly good working definitions, the modern financial wizards are constantly coming up with new instruments that are moneylike without actually being money.

Even experts, in other words, would have trouble answering your questioin.... first you'd have to decide what constituted money.

For broad categories of things that are moneylike, look up M1, M2, and M3. Each category moves farther away from hard currency, and more toward things that are 'moneylike'.

The government is stopping publication of the M3 figures, if I remember correctly. That's a VERY bad sign. It means they need to hide something.
posted by Malor at 6:21 AM on January 27, 2006


Crap, I hit post too soon, before I'd finished editing. My apologies for the typos and poor wording late in that answer.
posted by Malor at 6:23 AM on January 27, 2006


Are all ecconomies linked to gold reserves?

very few, these days - certainly not the US. Anyway the value of gold shifts... basically once we realized that "value" was something we assigned to metal, we realized we could just assign it directly to paper, so that's what we do now.

The main problem I see with answering this is what "counts" as money, since every time you put money in the bank, it gets taken out and used by someone else at the same time as being available to you - it's all fluid. There's the statistical fact that the bank will never have to give everyone all their money at the same time, so they can use some of the "same" money to give to two different accounts...
posted by mdn at 6:28 AM on January 27, 2006


Actually, mdn, what commodity-based money does is keep the politicians from abusing it too badly. You can assign value to paper based purely on scarcity, but it's always the tendency of the government to want to print too much of the stuff.

It's a form of invisible taxation.. they print up a bunch of bills, and can extract real goods and services for it from the economy. As long as they don't overdo it, people tolerate it, and call it 'inflation'. Thing is, our government is abusing it massively, and has been since the early 1990s.

THat's why everything is so inflationary these days, and it's only going to get worse. It started in the dotcom bubble, and moved to the real estate bubble, but it's definitely getting into the whole economy now. The powerful deflationary force of globalization has has kept the worst of it at bay, but that free ride appears to be (slowly) ending.
posted by Malor at 7:48 AM on January 27, 2006


or 152,647,815,000,000 Big Macs

public, are you taking into account the Big Mac Index?
posted by nyterrant at 8:35 AM on January 27, 2006


if a very small number of people suddenly had all the money, wouldn't that make it essentially valuless unless it was given back to a large number of people?

Not unless that concentration of money into a few hands went to such extreme lengths that the people who didn't have any invented some new kind of money to replace the stuff they couldn't get. Short of that, most people generally having less of the stuff would increase the perceived value of money, which is called deflation. Indeed, that the current increase in wealth in the USA is, more than in the past, concentrated within the group of people who already have lots of it could be one reason that consumer prices for many things are rising so much slower than the rate of money supply growth (particularly M3, which is flying high).
posted by sfenders at 9:59 AM on January 27, 2006


There is no finite amount, money is just an idea.

It's like asking how much love is there in the world.
posted by Mick at 11:03 AM on January 27, 2006


In December 2005, the World Gold Council reported (reg. req) world gold holdings of ~30,998 metric tonnes of gold and IMF-participating country holdings of ~27,581 metric tonnes of gold. For the participating countries, that gold represents 9.2% of the total foreign reserves. At 32,151 troy oz/metric tonne and today's closing price of $558.50/troy oz, you're looking at ~US$0.5 trillion locked up in gold. For the total foreign reserves of IMF countries, it's about US$5.4 trillion. Substitute 30,998 metric tonnes of gold instead and it's ~US$6.1 trillion for the whole world.
posted by junesix at 3:17 PM on January 27, 2006


And if a very small number of people suddenly had all the money, wouldn't that make it essentially valuless unless it was given back to a large number of people?

"Value" is a function of demand and money is it's proxy. Within that small group of people it still has value. Outside of that small group, if there is still demand for the money, then it has value. However, if the rest of the world decides to no longer recognize the money held in the hands of that small group, then it is "value-less" outside of the group.
posted by junesix at 4:55 PM on January 27, 2006


I agree with Mick. Money is simply green energy. It's potentially limitless.
posted by wordwhiz at 7:54 AM on January 28, 2006


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