Money doesn’t literally make the world go around, but it is an essential part of daily life. Nevertheless, counting how much of it there is on a global scale is a tough call, because to work out how much there is of something, we need to be clear about what’s being measured.
If you’re in a ‘just the facts’ kind of mood, then I can tell you that the amount of money in the world is somewhere between $36.8 trillion (‘narrow money’ as of 2017) and… well, a far, far higher number that could be a bit hard to comprehend.
We end up with that extremely weide range because, when it comes to money, determining what it is can be tricky. What you think of as money might not be the same as what the person next door thinks is money, and that will naturally change how much of it there is in the world.
So, what is money and how much is there?
At its simplest, money is the cold, hard cash in circulation – or ‘narrow money’ as it’s known in the world of finance. This includes notes and coins as well as the value of ‘easily accessed’ funds like current accounts.
If you’re only concerned about narrow money, then according to number crunchers at The Money Project (click for a great visual), there’s about $36.8 trillion in the world.
But money isn’t just what comes out of the cash machine; there’s ‘broad money’ too. As well as loose coins and wads of notes, broad money covers money that isn’t so easy to get to – savings, ISAs or fixed-term accounts. If we include this under the definition of money, then it all tots up to a staggering $90.4 trillion.
It doesn’t stop there.
Let’s not forget all the money held as debt ($215 trillion) or property ($217 trillion). If the thought of all those zeros hasn’t already left you bamboozled, let’s throw in a very rough high-end estimate of all the intangible assets in the world — which includes stocks and bonds, but is mostly the value of derivatives — and now we have to start talking about more than a quadrillion dollars. And no, that’s not a typo.
To put all that into perspective, the biggest economy in the world (the US economy) is valued at $20.4 trillion, based on World Economic Forum data. The UK is the fifth largest economy, valued at $2.94 trillion.
What other money is there?
So far, the numbers only take into account fiat money – in other words money issued by governments.
If we add non-fiat tender like cryptocurrency into the mix, the amount of money in the world grows by another $173 billion (depending on the day).
Plus, if we take money in its broadest sense, it is a token of exchange, but those tokens don’t always need a numerical value.
Bartering might not be common practice for many of us, but it still goes on. And those exchanges of goods or services carry no less value just because we can’t or don’t assign a financial worth to them. After all, who’s to say that exchanging a cow for two goats is worth more or less than swapping your coins for a pint of milk or lump of cheese? Think of money like this, and suddenly calculators don’t quite cut it when it comes to working out exactly how much of it there really is.
Real value or no value?
In reality, money itself has no actual value. Money only works as currency, because most of us have signed up to the belief that polymer notes and round bits of metal are worth the value stamped on them. It’s not quite a case of the emperor’s new clothes, but it is sort of.
Perhaps then, with our elaborate (but ultimately fragile) trust in money, it shouldn’t come as a surprise that physical currency accounts for less than 10% of all money. As digital payments increase in popularity, that number is likely to fall even further.
In Sweden, for example, 80% of all transactions are now done digitally. By 2050, Sweden’s national bank believes that the amount of physical money circulating in the country will be cut by half.
It’s a similar story right here in the UK. Data from HM Treasury shows that the use of physical coins and notes has declined steadily over the last decade. In contrast, contactless card payments have soared over the last three years. If cashless society rules and tangible currency disappears, will it mean having to rethink the meaning of ‘money’ and how we count it?
The last word
Whichever way you look at it, counting up how much money there is in the world is difficult, to say the least.
On the one hand, the numbers are so huge, they’re hard to comprehend. On the other, how do you quantify a concept that changes in value – not just in terms of currency rates, but in meaning too?
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.