# How much money is there?April 27, 2005 4:48 AM   Subscribe

I have what I think is a simple question: how much money is there in the world? Both on paper and in cash, all countries combined, has anyone ever calculated this? Is it possible to calculate this?
posted by zardoz to Work & Money (13 answers total)

This is a really difficult question to answer, and not because it's a big question, but because money is such a complex thing.

Let's say I put a hundred dollars in a bank. That bank obviously doesn't keep that hundred dollars. It will lend out most (but not all) of it. Let's say 90%. So Abe comes along and takes out a loan for ninety dollars. He gives it to Bill in exchange for a service. Bill then puts that \$90 back in the bank. How much money is there in the bank? They'd say \$190. How much money is really in existance? And what happens when the bank lends 81 of those dollars to Cecil? And when Dave puts it back in? And when Earl borrows 73 of those dollars?

See Money supply.
posted by Plutor at 4:59 AM on April 27, 2005

\$56.44
posted by n9 at 5:09 AM on April 27, 2005

I'm not sure, but I bet the answer involves this. You could go by each country's GDP and currency exchange rate and come up with what I'm guessing would be a fairly decent SWAG.
posted by kimota at 5:44 AM on April 27, 2005

A partial answer for USD only: in February, M1 was \$1.4 trillion, while M3 was \$9.5 trillion. Plutor's link explains what M1, M2, and M3 are.

On preview, kimota, that's totally wrong.
posted by grouse at 5:46 AM on April 27, 2005

GDP is value of goods and services, which by itself is a poor approximation for money supply, since: nominal GDP/money supply = velocity, or the number of times money is turned over.

Only using M2 money supply figures for the four largest world's economies but having GDP figures for every country, this Google Answerer (implicitly) assumes that the average velocity from the four largest economies extends across all countries - the way they express it is Big 4 GDP/Total GDP = Big 4 M2/Total M2 - to arrive at a Total M2 figure of \$46.5 trillion.
posted by milkrate at 6:13 AM on April 27, 2005

That answer, which someone paid \$200 for, attempts to infer a linear regression from data that looks like this:

We report, you decide. Sorry the image was so big.
posted by grouse at 6:45 AM on April 27, 2005

You mean this thing that drives the world could turn out to be a giant farce?
posted by weapons-grade pandemonium at 7:05 AM on April 27, 2005

We're talking money, not the value of it.
Giving value to pieces of paper or rolls of silver just works in the human head. We could be paying our bills in paper-planes if that's what everybody agreed on. Come to think of it, that might not be such a bad idea...

In "paper and cash", I think the OP meant to not include all the virtualized (= in the banks' computers) money, just what could be found in wallets, pockets, and under sofa cushions (and, sadly, while finding out why the washing machine is dead, damn it!).

My answer : hard to tell.
posted by XiBe at 8:00 AM on April 27, 2005

odinsdream: "No, I mean that when I make something of value, you want it. So, there's an imbalance, but your want offsets my thing-of-value, so the total system is still at zero."

Money isn't only used to buy goods. It's also used to buy services. Plus, the value of most goods isn't equal to the sum of its parts. A pizzeria must sell a pizza for more than cost of ingredients plus cost of labor plus overhead. So it's not a zero-sum equation.
posted by Plutor at 8:07 AM on April 27, 2005

Odinsdream, in economic theory, there is usually a difference between what you pay for a good and how much you value it. This is called the consumer surplus.

To expand on Plutor's example: Let's say I really like pizza. I like it so much, I would be willing to pay \$3 for a slice of really good pizza. There is a pizza joint down the street that sells really good pizza for \$2.50. If I'm willing to pay \$3, but only have to pay \$2.50, I'm 'pocketing' \$0.50 of consumer surplus - so it's not a zero-sum game. They could still get away with charging me \$2.75 or even \$2.99, and I would still be making a 'surplus' on the deal.

On the flip side, let's say it only costs the producer \$1 to make my \$2.50 slice. They're pocketing a 'producer surplus' of \$1.50 on the deal. Taking everything together, the pizza transaction has resulted in a 'social surplus' of \$0.50 (my increased 'happiness' as a result of not having paid a whole \$3 for the slice) + \$1.50 (the pizza joint's profit).

In other words, we've all made out well. I made out well because I paid \$0.50 less for the pizza than I would have been willing to pay, so I've got \$0.50 of residual 'value' in my pocket. And the pizza joint made a profit, so everybody wins. Or so say the economists.
posted by nyterrant at 9:37 AM on April 27, 2005

Sorry, I conflated producer surplus and profit a bit. A producer surplus is the difference between the price at which a producer sells a good, and the price at which he would be willing to sell the good. Most of the time this should be the break-even price, so I think the example still works.
posted by nyterrant at 9:43 AM on April 27, 2005

nowhere near enough ...
posted by pyramid termite at 9:52 AM on April 27, 2005

it isn't a farce, but you can't "create" worth. The worth is already out there.

And, to extend the pizza analogy, suppose an incompetent chef is taking all the city's mozzarella and flour and turning out really bad pizza that no one wants to eat at any price. In this case, either "worth (value) that's already out there" is getting destroyed.

In the case of the skilful pizza chef - worth (value) is added to the raw ingredients by the skill of the chef, and you can quantify how much by subtracting the worth of the ingredients from the worth of the finished slice of really good pizza. In theory this depends, yes, on the demand for the pizza, but the nice thing about this is that, using money and prices, the calculation is automatic and transparent and Joe Pizza-Chef never actually has to worry about supply and demand.

medium of exchange, store of value, unit of account
posted by ikkyu2 at 10:16 AM on April 27, 2005

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