Divide it amongst yourselves.
July 18, 2011 7:35 AM Subscribe
If all the people in all the world took all of their cash (whether it's in a bank or not) and divided it equally amongst everyone, how much would each and every person in the world end up with?
I'm just thinking about personal cash or cash-like assets. Not houses, not corporate wealth, not jewelry.
I'm just thinking about personal cash or cash-like assets. Not houses, not corporate wealth, not jewelry.
Currency in circulation is just bills and coins. It's what's in people's wallets, not what's in people's bank accounts, retirement accounts, redeemable securities, and other "cash and cash equivalents." Currency is only the tiniest tip of this iceberg.
posted by FLAG (BASTARD WATER.) (Acorus Adulterinus.) at 7:54 AM on July 18, 2011 [1 favorite]
posted by FLAG (BASTARD WATER.) (Acorus Adulterinus.) at 7:54 AM on July 18, 2011 [1 favorite]
What you probably want is the money supply. The US has about $10.3 trillion in the MZM money supply, which is the broadest measure of what you might call cash-like assets in the US. The EU has $13.4 trillion in its broadest measure.
That totals $23.7 trillion. The US and EU account for about half of the world GDP, so if we simply multiply that by 2 we get $47.4 trillion. Dividing by the world population we get about $7000 per person.
But I agree that the figure gets pretty vague and squishy once you start talking about the money supply, since different countries measure the money supply differently, and it's debatable whether a given component of the money supply is really a liquid or cash-like asset (e.g. the broadest EU measure includes debts redeemable at 2 years).
posted by jedicus at 7:57 AM on July 18, 2011
That totals $23.7 trillion. The US and EU account for about half of the world GDP, so if we simply multiply that by 2 we get $47.4 trillion. Dividing by the world population we get about $7000 per person.
But I agree that the figure gets pretty vague and squishy once you start talking about the money supply, since different countries measure the money supply differently, and it's debatable whether a given component of the money supply is really a liquid or cash-like asset (e.g. the broadest EU measure includes debts redeemable at 2 years).
posted by jedicus at 7:57 AM on July 18, 2011
Is there a reason you're discarding everything that isn't liquid cash? Most substantial wealth is not directly held as cash or cash-like assets, but is tied up in real estate, corporate stock, etc. You can come up with a number, but it won't be terribly meaningful - even if you just want it as a symbolic thing, it'll be pretty drastically wrong, as it'll be missing most of the world's wealth.
posted by Tomorrowful at 7:57 AM on July 18, 2011
posted by Tomorrowful at 7:57 AM on July 18, 2011
To answer a question you didn't ask, but whose answer will be (at least slightly) more meaningful -- the total annual production of the entire world, measured in PPP, is approximately 74 trillion dollars right now. Divide that by the same 6.775 billion people, and you could conclude that the average annual income, were it evenly divided, would be about $11,000 in real wealth (using the value of "11k" that an American is accustomed to thinking about.)
Horselover, agreed.
posted by foursentences at 8:01 AM on July 18, 2011 [2 favorites]
Horselover, agreed.
posted by foursentences at 8:01 AM on July 18, 2011 [2 favorites]
Is there a reason you're discarding everything that isn't liquid cash? Most substantial wealth is not directly held as cash or cash-like assets, but is tied up in real estate, corporate stock, etc. You can come up with a number, but it won't be terribly meaningful - even if you just want it as a symbolic thing, it'll be pretty drastically wrong, as it'll be missing most of the world's wealth.
Exactly. In fact, you'd probably come up with meaningless negative numbers for the richest developed economies.
Take Britain -- median average savings for Britons is £2.5k in cash, but average liquid non-mortgage debt is around £8k per household.
posted by TheAlarminglySwollenFinger at 8:02 AM on July 18, 2011 [1 favorite]
Exactly. In fact, you'd probably come up with meaningless negative numbers for the richest developed economies.
Take Britain -- median average savings for Britons is £2.5k in cash, but average liquid non-mortgage debt is around £8k per household.
posted by TheAlarminglySwollenFinger at 8:02 AM on July 18, 2011 [1 favorite]
jedicus is right in that you're basically asking about the money supply. Here are some actual figures (last graph) suggesting that the global M1 is around $20 trillion and the global MZM--which is between M2 and M3--is actually just over $50 trillion. So I'd give a ballpark figure in the $7,400/person range.
Of course, there's no way to tease out how much of that is owned by sovereign governments or corporations, which really does sort of render your question meaningless unless we take the position that governments and corporations are ultimately owned by individuals anyway.
posted by valkyryn at 8:03 AM on July 18, 2011
Of course, there's no way to tease out how much of that is owned by sovereign governments or corporations, which really does sort of render your question meaningless unless we take the position that governments and corporations are ultimately owned by individuals anyway.
posted by valkyryn at 8:03 AM on July 18, 2011
The only way of breaking apart this question is to read it literally; in other words, to recognize that the OP is asking about cash--physical currency held in a bank or under a mattress--and not about other liquid or illiquid assets. Redefining it as "money supply" as jedicus did seems essentially okay as well. Needless to say, if we're trying to calculate a number corresponding to the world's total wealth, the figure becomes astronomical (and impossible to agree on) when we include its largest asset--land.
posted by Gordion Knott at 8:06 AM on July 18, 2011
posted by Gordion Knott at 8:06 AM on July 18, 2011
The only way of breaking apart this question is to read it literally; in other words, to recognize that the OP is asking about cash--physical currency held in a bank or under a mattress--and not about other liquid or illiquid assets.
On the other hand, he's also talking about all the people in the world -- and I imagine there are some people in the world who do not use "physical currency" as we know it. In other words -- what do we do with the people living in cultures who use a barter system?
posted by EmpressCallipygos at 8:25 AM on July 18, 2011
On the other hand, he's also talking about all the people in the world -- and I imagine there are some people in the world who do not use "physical currency" as we know it. In other words -- what do we do with the people living in cultures who use a barter system?
posted by EmpressCallipygos at 8:25 AM on July 18, 2011
To add to folks mentioning how debt might factor in, it might be worth noting that banks can claim to have money that doesn't actually exist.
1) Remember the old Savings and Loan from It's a Wonderful Life?
Your money's in people's houses! IntheKennedy house, andtheMacClaren house, and in your house, andahundred others. You all put your savings in here and then we make loans to people to buy homes and cars and other things.
2) For reasons beyond my understanding, big banks can, say, loan someone a million dollars if they have 100,000. They don't need the full million.
Just tangential food for thought.
posted by jander03 at 9:32 AM on July 18, 2011
1) Remember the old Savings and Loan from It's a Wonderful Life?
Your money's in people's houses! IntheKennedy house, andtheMacClaren house, and in your house, andahundred others. You all put your savings in here and then we make loans to people to buy homes and cars and other things.
2) For reasons beyond my understanding, big banks can, say, loan someone a million dollars if they have 100,000. They don't need the full million.
Just tangential food for thought.
posted by jander03 at 9:32 AM on July 18, 2011
Just thirding that GDP per capita is the best way to think about this question. GDP includes ALL production of goods and services (outputs), or equivalently ALL inputs (labor, capital, use of land, ...).
Restricting yourself to cash makes the question hopelessly difficult, since "cash" is itself a vague concept (does stock count? do inflation or exchange rate fluctuations increase the total amount of "cash"?)
It looks like the above number of $11k per person is actually "GDP at purchasing power parity," that is adjusting for the low cost of living outside the developed world. Nominal GDP is more like $9,000 per person.
posted by miyabo at 10:29 AM on July 18, 2011
Restricting yourself to cash makes the question hopelessly difficult, since "cash" is itself a vague concept (does stock count? do inflation or exchange rate fluctuations increase the total amount of "cash"?)
It looks like the above number of $11k per person is actually "GDP at purchasing power parity," that is adjusting for the low cost of living outside the developed world. Nominal GDP is more like $9,000 per person.
posted by miyabo at 10:29 AM on July 18, 2011
2) For reasons beyond my understanding, big banks can, say, loan someone a million dollars if they have 100,000. They don't need the full million.
Not exactly. You're getting at fractional reserve banking, the system whereby a bank does not need to have $1 on hand for every $1 of deposits they have on their books, just $1 of deposits for every $1 in loans they issue. There's a difference.
Say you deposit $1 million in the bank with a 10% fractional reserve requirement. The bank can then turn around and lend out $900,000 keeping 10% of your deposit in reserve. The books then say they owe you $1 million, they have $100,000 in cash, and own a $900,000 asset, namely the loan. The books balance, and they aren't going to be able to loan any more money until someone makes another deposit or the debtor starts paying back the loan.
Clearly, if you come to withdraw your $1 million tomorrow, there's going to be a problem, because the bank doesn't actually have the money to pay you right now. This kind of system only works because the bank presumably has other depositors, most of whom aren't asking for their money at any given time. When they do it's called a bank run, and when you hear about a bank "failing," that's basically what's happening. The FDIC exists to mitigate the effects of said failures.
But the bank isn't technically lending out money it doesn't have. That would violate all kinds of banking regulations.
Of course, that's exactly what hedge funds and investment banks do all the time, but now we're talking dodgy, high-end investment vehicles, not retail banking.
posted by valkyryn at 10:53 AM on July 18, 2011 [1 favorite]
Not exactly. You're getting at fractional reserve banking, the system whereby a bank does not need to have $1 on hand for every $1 of deposits they have on their books, just $1 of deposits for every $1 in loans they issue. There's a difference.
Say you deposit $1 million in the bank with a 10% fractional reserve requirement. The bank can then turn around and lend out $900,000 keeping 10% of your deposit in reserve. The books then say they owe you $1 million, they have $100,000 in cash, and own a $900,000 asset, namely the loan. The books balance, and they aren't going to be able to loan any more money until someone makes another deposit or the debtor starts paying back the loan.
Clearly, if you come to withdraw your $1 million tomorrow, there's going to be a problem, because the bank doesn't actually have the money to pay you right now. This kind of system only works because the bank presumably has other depositors, most of whom aren't asking for their money at any given time. When they do it's called a bank run, and when you hear about a bank "failing," that's basically what's happening. The FDIC exists to mitigate the effects of said failures.
But the bank isn't technically lending out money it doesn't have. That would violate all kinds of banking regulations.
Of course, that's exactly what hedge funds and investment banks do all the time, but now we're talking dodgy, high-end investment vehicles, not retail banking.
posted by valkyryn at 10:53 AM on July 18, 2011 [1 favorite]
@Valkyryn
Ah, that seems like a good revision to my statement. Thanks!
posted by jander03 at 11:09 AM on July 18, 2011
Ah, that seems like a good revision to my statement. Thanks!
posted by jander03 at 11:09 AM on July 18, 2011
Response by poster: Thanks all - yes, sorry about the vagueness but, without the vagueness I wouldn't have been able to read this lovely little discussion on what's actual meaningful and what isn't.
I wasn't actually trying to get at anything meaningful, just one of those casual curiosities that I wouldn't have known how to start figuring out myself and so I turned to you. As always, the answers have been very illuminating.
Thanks!
posted by HopStopDon'tShop at 11:23 AM on July 18, 2011
I wasn't actually trying to get at anything meaningful, just one of those casual curiosities that I wouldn't have known how to start figuring out myself and so I turned to you. As always, the answers have been very illuminating.
Thanks!
posted by HopStopDon'tShop at 11:23 AM on July 18, 2011
The bank can then turn around and lend out $900,000 keeping 10% of your deposit in reserve.
Not to derail, but this is not quite how it works. The bank does indeed hold the $1m, and will create another $10m in loans based on that reserve.
When the bank writes the new $10m loans, it just writes new loan accounts with $10m,and a new corresponding deposit account with the $10m balance. Only a small fraction of customers will try to withdraw their new loan in cash. Transfers of the loaned funds to other banks are typically offset by other transfers in the other direction, the net requirement for actual cash is far less than $10m
The $10m didn't exist before, that is one of the key mechanisms for how the money supply grows, by banks writing new loans.
posted by dave99 at 8:06 PM on July 18, 2011
Not to derail, but this is not quite how it works. The bank does indeed hold the $1m, and will create another $10m in loans based on that reserve.
When the bank writes the new $10m loans, it just writes new loan accounts with $10m,and a new corresponding deposit account with the $10m balance. Only a small fraction of customers will try to withdraw their new loan in cash. Transfers of the loaned funds to other banks are typically offset by other transfers in the other direction, the net requirement for actual cash is far less than $10m
The $10m didn't exist before, that is one of the key mechanisms for how the money supply grows, by banks writing new loans.
posted by dave99 at 8:06 PM on July 18, 2011
This thread is closed to new comments.
(1) Dollars have different purchasing power in different places;
(2) the distribution of currency is basically substantively irrelevant without any consideration of the distribution of substantive resources;
(3) even if our goal is for some reason to calculate the average amount of currency per human being, it's arbitrary to limit ourselves to M1 and not M2 or M3.
What you've got there is basically a meaningless number, like the total temperature of all the stars in the universe, or the average number of molecules in a rock band.
posted by foursentences at 7:49 AM on July 18, 2011 [7 favorites]