How Much Money Is in The World?

How much money is there in the world? It is a simple question with countless complicated answers.

Surely we have all asked ourselves this question, because it is the million dollar question in a literal sense. The answer is that the amount is variable and depends on many situations. Mainly how the ephemeral concept of money is defined . For some more classically minded, money is gold and silver . They call everything else credit.

But, if you have ever wondered how much money exists in the world, you have probably thought that the answer to this should be a fairly high figure, however, the answer is not that simple. In this world, in which cash represents only a small percentage of the total, so we have to consider many factors that can give us an answer.

At present the value of money is established by people’s trust in it, this is because a large amount of money that circulates in society has not been issued by national governments nor is it backed by reserves of the countries, but approximately 90% of the money that is circulating in the world is money that private commercial banks have invented and only 10% is money in coins and bills that are officially omitted by governments.

Cash in the world

In order to know how much money there is in the world , it would not be enough to take into account the different coins and bills that exist. Total money is a result of different products, one of which is the case of cash. The money that circulates together with the physical money that is deposited in bank safes is known to be called the monetary base. The monetary base is the total amount of cash that exists in the world.

Different types of money

To know and know the total money in the world , it is also worth considering the money we have in our savings or checking accounts, checks or deposits made, that is, money that is immediately available. This type of money is known as Narrow Money and this category also includes cash, another name by which it is known is M1.

If you add to M1 the money with availability in the short or medium term, such as time deposits, the result would be a considerably higher amount, which is known as M2. If to this is added the temporary assignments of money , the securities that are not shares, the participations in money market funds, from this part, there are different types that encompass the aforementioned and can be differentiated according to the function of its availability, as well as the virtuality of the money that is being talked about, in this modality we can find in M6 and even an M7.

Sum of bank products

After mentioning all this, it is more clearly understood how complicated it is to calculate all the money in the world, but estimates can be made. It is approximated that there are more than sixty thousand billion dollars, of which only 1% are papers or currencies, for this reason we can imagine the importance of the products and financial entities that control the threads of the global economy.

How much money is there in the world

In these times when demand is evident anywhere, particularly in the macroeconomic sphere , these formulas of credit are often considered for money and in these areas that word is applicable to many other substances and entelechies. So the problem with analysis is not so much the large number of zeros that are being added as the definition expands and becomes much more abstract, but the content and parameters of the definition.

We must also take into account the silver market, which is around 14 billion. The first thing you have to know is that, unlike gold, silver has about 10 thousand applications in the medical, electronics, etc. Also, understand its use as real money. It is about understanding that the cost of precious metals, whether gold or silver, has been highly repressed for decades by central banks, precisely because history has shown that they are the only money that is really worth, and for this reason, they are parameters against which your currency inventions such as the euro, dollar, yen, pound, peso, yuan, etc. have to be priced.

According to the value of the capitalization of the most coveted company that is the New York Stock Exchange, Apple. With $ 616 billion, we can seriously zero out that it’s about the Anglo trillions.

The debt of the world has occupied an important step, because this is because the sovereign debt in the form of national bonds, the total of this is $ 199 AT which were acquired and created out of thin air after the crisis in 2008 This means that, in a period of 8 years, the world contracted an additional debt that is equivalent to 94 times the market value of Apple.

The quantum leap

In this part is when the financial accounting of the world takes a mortal leap, as it rises to the most exaggerated altitudes, which are derivative instruments. They are so important because of their insane figure of 1.2 quadrillion. Which is equivalent to almost 2,000 Apples.

It is said that these derivatives were supposedly created as a remedy against financial risk , but according to many analysts, precisely the opposite effect has been achieved, which is to increase risk. In fact, the financial weapons of mass destruction are the proof of this and, although it is true that they make up a set that adds up to zero, the tragedies that they will eventually have to cause among individual gamblers, by exploding, among formal losers are unimaginable. and disappointed winners, who their counterpart could not pay. Ultimately, everyone ends up being losers.

A simple way to do the explanation would be that in the banking system that each country has, there are people and companies that have money which they plan to deposit with the banks, in the form of current accounts, fixed terms, savings accounts, etc. When a person has deposited money in a bank, this money would not be kept in a vault forever, waiting for the person to withdraw it one day.

How much money is there in the world

On the contrary, what happens is that the bank will use that money to lend it to others who come to apply for loans . However, you must retain or keep a certain percentage of that money in reserves, in case the client wishes to withdraw it at any time. The percentage may vary from country to country, and it has been established by the central bank of each country that private banks have an obligation that consists of keeping 10% of the deposits as a reserve, thus when a person deposits 10 thousand dollars in a bank, this bank must keep a thousand dollars in bills inside its vaults and the rest can be used to lend it to others in the form of credit.

This system has worked in this way due to the probability that all clients want to withdraw their money at the same time is quite low, for this reason, if there are 100 clients in a bank with an average of $ 2,000 deposited each, it is would have a total of 200 thousand dollars deposited, so that the bank will have the obligation to reserve 10 percent, which is equivalent to 20 thousand dollars, while the rest, which is 180 thousand dollars, could be used for other purposes, like to be lent to other people.

For example, suppose that a client deposits a million dollars in the bank , the aforementioned bank can use up to 90% of the client’s deposits to be loaned to other users, in this case it would be 900 thousand dollars. Now suppose that someone else needs a loan of $ 200,000 to purchase a house, another customer needs $ 300,000 to open a new commercial business, and another person takes out a loan of $ 400,000 for the entire purchase of a house. Since the bank only has $ 900 of the first customer’s deposits, it can give that total to all three people.

But, the bank is not going to deliver the 900 thousand dollars in cash to its clients, but adds them to their bank account , this means that they simply invent that money out of thin air, it is only a number in the base of bank account details. For this reason, the million dollars that was initially deposited will remain intact in cash, only that with its fractional reserve system, the bank will have the right to invent the amount up to 90 percent of the total that is kept in cash. In this way, the 900 thousand dollars will have been added to the financial system.

Leave a Reply

Your email address will not be published. Required fields are marked *