How does the international world have/measure a set amount of money? What is the total sum of money in the world?
In: Economics
The world does not have a “cap” on the available money. There are 6 measures of “how much money is there?” [(ref)](https://en.wikipedia.org/wiki/Money_supply).
> M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money.
MB: is referred to as the monetary base or total currency.[8] This is the base from which other forms of money (like checking deposits, listed below) are created and is traditionally the most liquid measure of the money supply.
M1: Bank reserves are not included in M1.
M2: Represents M1 and “close substitutes” for M1. M2 is a broader classification of money than M1. M2 is a key economic indicator used to forecast inflation.
M3: M2 plus large and long-term deposits. Since 2006, M3 is no longer published by the US central bank. However, there are still estimates produced by various private institutions.
MZM: Money with zero maturity. It measures the supply of financial assets redeemable at par on demand. Velocity of MZM is historically a relatively accurate predictor of inflation.
These measures are typically published for each currency. The numbers change all the time, but the focus is on measuring, not limiting.
Most of the change is caused by “fractional reserve banking”, the banking scheme used in most countries. You deposit $100 in a bank and they loan $95 to someone. Now your $100 of “bank assets” and the other person’s $95 of real cash counts at $195 in M0. You and the bank turned $100 into $195 “magically”.
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