How does the international world have/measure a set amount of money? What is the total sum of money in the world?


How does the international world have/measure a set amount of money? What is the total sum of money in the world?

In: Economics

They measure production and spending. The total sum of money isn’t that useful of a metric. If I have $10,000,000 in cash sitting in my couch cushion it doesn’t do anything, but if I spend it, it trades hands and speeds up the economy.

This breaks it down well for a generic “how much”

But like the article says it’s hard to quantify what would or would be considered a monetary value, with many places on Earth utilizing a barter system of sorts where they’ll trade labor, goods, resources for labor good or resources. A lazy example of that would be I’d be willing to let someone live in my spare room for a month rent free if they would paint my house, and install my new floors and make the repairs needed in a prep to sell. Sure it would take me about a week and a half of doing it after work and the weekend to get it all done, but it’s value to have someone else do it isn’t worth paying but it’s worth letting a guy or gal sleep in my spare bedroom 🤷‍♂️

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.

The world does not have a “cap” on the available money. There are 6 measures of “how much money is there?” [(ref)](

> 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”.