Determining the total amount of money in the world is a complex task due to the various forms of money, including physical currency, digital currencies, and other financial instruments. This article explores the different types of money, provides estimates of the global money supply, and discusses the challenges in quantifying the total amount of money in the world.
Key Facts
- The total amount of money in the world is difficult to determine due to the various forms of money, including physical and virtual currencies.
- Economists categorize money into different types based on liquidity, such as M0, M1, M2, and M3.
- M0 refers to the monetary base, which includes all the money in circulation, including money held in reserve by banks.
- M1 includes M0 money supply and adds money held in travelers’ checks, demand deposits, and other types of checkable deposits.
- M2 includes all the currency from the M1 money supply and expands to include mutual funds, smaller time deposits, and other types of time deposits.
- The total global money supply is estimated to be nearly $83 trillion, with M1 accounting for $48.9 trillion.
- The Bank for International Settlements estimated that there is approximately $8.28 trillion worth of notes and coins in circulation across 20 major countries plus the euro area.
- The global M2 supply is estimated to be $82.6 trillion.
- Money is also present in the form of investments and derivatives, with the total market capitalization of the New York Stock Exchange and Nasdaq being over $48 trillion.
- The total market capitalization of cryptocurrency adds another $1.07 trillion to the overall money supply.
Different Types of Money
Economists categorize money into different types based on liquidity, which refers to how easily and quickly an asset can be converted into cash. The most common categories of money are:
- M0: Also known as the monetary base, M0 includes all the money in circulation, including money held in reserve by banks.
- M1: M1 includes M0 money supply and adds money held in travelers’ checks, demand deposits, and other types of checkable deposits.
- M2: M2 includes all the currency from the M1 money supply and expands to include mutual funds, smaller time deposits, money market securities, and other types of time deposits.
- M3: M3 includes all the elements of M2, plus institutional money market funds and large time deposits.
Global Money Supply
The total global money supply is estimated to be nearly $83 trillion, with M1 accounting for $48.9 trillion. The Bank for International Settlements estimated that there is approximately $8.28 trillion worth of notes and coins in circulation across 20 major countries plus the euro area. The global M2 supply is estimated to be $82.6 trillion.
Challenges in Quantifying the Total Amount of Money
Quantifying the total amount of money in the world is challenging due to several factors:
- Diverse Forms of Money: Money exists in various forms, including physical currency, digital currencies, and other financial instruments. This diversity makes it difficult to accurately measure the total money supply.
- Cross-Border Transactions: The global economy involves complex cross-border transactions, making it challenging to track the movement of money across different countries and currencies.
- Unrecorded Transactions: Some economic activities and transactions may not be recorded in official statistics, leading to an underestimation of the actual money supply.
Conclusion
The total amount of money in the world is a complex and dynamic concept that is influenced by various factors. While estimates of the global money supply provide insights into the overall liquidity and economic activity, accurately quantifying the total amount of money remains a challenging task due to the diverse forms of money, cross-border transactions, and unrecorded economic activities.
Sources:
- How Much Money Is In The World? A Ticking Timebomb
- How Much Money Is in the World Right Now?
- Curious Kids: how much money is there in the world?
FAQs
How much money is in the world?
Answer: The total amount of money in the world is difficult to determine precisely due to the various forms of money and the challenges in quantifying it. Estimates of the global money supply vary, but it is generally believed to be in the tens of trillions of dollars.
What are the different types of money?
Answer: Money can be categorized into different types based on liquidity, including M0 (monetary base), M1 (M0 plus demand deposits and other liquid assets), M2 (M1 plus savings deposits and other less liquid assets), and M3 (M2 plus large time deposits and institutional money market funds).
What is the difference between physical money and digital money?
Answer: Physical money refers to tangible currency, such as banknotes and coins, while digital money is electronic money stored and transferred electronically. Digital money can include funds in bank accounts, electronic payments, and cryptocurrencies.
How is the global money supply controlled?
Answer: The global money supply is controlled by central banks and other monetary authorities through various mechanisms, such as setting interest rates, conducting open market operations, and implementing reserve requirements.
How does the global money supply affect the economy?
Answer: The global money supply can impact economic activity, inflation, and exchange rates. Changes in the money supply can influence the availability of credit, investment, and consumer spending.
What are the challenges in quantifying the total amount of money in the world?
Answer: Quantifying the total amount of money in the world is challenging due to factors such as the diverse forms of money, cross-border transactions, and unrecorded economic activities. Additionally, the definition of money can vary depending on the context and purpose of the measurement.
How is the global money supply measured?
Answer: The global money supply is measured using various metrics, including M0, M1, M2, and M3. These metrics represent different levels of liquidity and include various types of money, such as physical currency, demand deposits, savings deposits, and other financial instruments.
What is the future of money?
Answer: The future of money is uncertain, but there are ongoing developments in digital currencies, blockchain technology, and other innovations that may reshape the way we think about and use money.