How does the international world have/measure a set amount of money? What is the total sum of money in the world?
In: Economics
It’s possible to trade one currency for another, so if there are 1 trillion dollars and 1 trillion Euro and each Euro is worth 1.2 dollars, the value of all that money is 2.2 trillion dollars (or 1.83 trillion Euro). If you do this for every currency and total it all up in US dollars, that’s a good enough measure of all the money in the world.
However, the idea of “money” is surprisingly flexible, so it’s difficult to get one definitive measure. The narrowest one would be cash and coin, which is about $5 trillion. However, most “money” isn’t sitting around in cash. Most money is “in” bank accounts. Banks aren’t just sitting on cash equal to the money in their accounts, so that money is really just a promise by the bank to give you the money if you ask for it. In other words, it’s debt. Some debts are more like cash than others. A checking account can be very easily turned into cash. A savings bond is harder to turn into cash, etc. You can expand the definition of “money” in this way until you’re talking about basically all debt (not just what banks owe to people but what they owe to corporations, what corporations owe to each other, what banks owe to each other, what governments owe to everyone, etc.) At that level, the amount of “money” in the world is more like $1 quadrillion.
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