We have certainly all asked ourselves this question, because it is the million dollar question in a literal sense. The solution is that the amount is variable and depends on many situations. Mainly how the ephemeral is established money concept. For some more classically minded, money is Gold and silver. They call everything else credit.
But, if you've ever wondered how much money exists in the world, you've probably thought that the solution to this should be a fairly high number, despite everything, the solution is not that simple. In this world where the cash it represents only a small percentage of the total, so we must consider many factors that can give us an answer.
Today the value of money is defined by people's trust in it, this is because a large amount of the money that circulates in society has not been issued by national governments nor is it backed by the reserves of countries, but that approximately 90% of the money that is circulating in the world is money that commercial private banks They have been invented and only the 10% is money in coins and bills that governments officially omit.
Cash in the world
To be able to know how much money is there in the worldIt would not be enough to take into account the different coins and bills that exist. Total money is the 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 the safes of the banks is known as 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 worldIt is also important to consider the money we have in our savings or checking accounts, checks or deposits made, in other words, the money that is immediately available. This type of money is known as Tight money and this category also includes cash, another name by which it is known is M1.
If we add to M1 the money with availability in the short or medium term, such as term deposits, the result would be a considerably higher amount, which is known as M2. If to this is added the temporary money transfers, securities other than shares, participations in money market funds, from this part, there are different typologies that include those previously mentioned and can be differentiated according to the function of their availability, as well as the virtuality of the money of which it is that is spoken, in this way we can find it in M6 and even in an M7.
Sum of bank products
After mentioning all this, it is more clearly understood how complicated it is 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 the 1% are papers or currencies, for this reason we can imagine the relevance of the products and financial entities that control the threads of the world economy.
In these times in which the demand is evident anywhere, specifically in the macroeconomics sphereThese credit formulas are usually considered for money and in these areas that word is applicable to many other substances and entelechies. So the problem in the analysis is not so much the large number of zeros that are added as the definition expands and becomes much more abstract, but the content and parameters of the definition.
We must also assimilate the silver market counts which is about 14 billion. The first thing to know is that, unlike gold, silver has about 10,000 applications in the medical and electronic industries, etc. At the same time, understand its use as real money. It consists in understanding that the cost of precious metals, whether gold or silver, has been very repressed for decades by central banks, exactly because history has shown that they are the only money that is truly worth, and that is why they are parameters. against which their inventions of currency have to quote, such as the euro, dollar, yen, pound, peso, yuan, etc.
According to the value of the company capitalization more coveted than the New York Stock Exchange, Apple. With $ 616 billion, we can seriously zero out what equates to trillions of dollars.
The world debt has taken an important step, because this is due to sovereign debt in the form of national bonds, the total of this is $ 199 AT that were acquired and created out of thin air after the 2008 crisis. This means that, In a span of 8 years, the world incurred additional debt equal to 94 times the market value of Apple.
The quantum leap
This is when the world financial accounting takes a somersault, as it rises to the most exaggerated altitudes, which are derivative instruments. They are so important due to their incredible number of 1.2 trillion. Which is equivalent to almost 2000 apples.
These derivatives are said to have been created as a remedy against financial risk, but according to many analysts the opposite effect has been achieved, which is to increase risk. In reality, the financial weapons of mass destruction are the proof of this and, although it is true that they make up a compilation that adds up to zero, the tragedies that they must eventually cause among individual players, when they explode, among formal players. losers are unimaginable. and disappointed winners, whom their counterparts could not pay. In the end, everyone ends up being losers.
A simple way to do the explanation would be that in the Bank System that each country has, there are people and companies that have money that they plan to deposit in banks, in the form of checking accounts, time deposits, savings banks, etc. When a person has deposited money in a bank, this money will not be permanently stored in a vault, hoping that the person will withdraw it one day.
On the contrary, what happens is that the bank will use that money to lend it to other people who come to apply for loans. However, you must retain or keep a certain percentage of that money in reserve, in case the customer wants to withdraw it at any time. The percentage may vary from one country to another, and it has been established by the central bank of each country that private banks have an obligation that consists of keeping the 10% of deposits as a reserve, in other words, when a person deposits 10 thousand dollars in a bank, this bank must keep 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 this way because of the likelihood that all customers want withdraw your money at the same time, it is quite low, so if a bank has 100 clients with an average of $ 2,000 deposited each, it would have a total of $ 200,000 deposited, so the bank will have the obligation to reserve the 10 percent, equivalent to $ 20,000, while the remainder, which is $ 180,000, can be used for other purposes, such as lending to other people.
As an example, suppose that a the customer deposits a million dollars in the bank, the aforementioned bank may 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 someone else requires a loan of $ 200,000 to buy a house, another customer requires $ 300,000 to open a new commercial business, and another person requests a loan of $ 400,000 for the entire purchase of a house. Since the bank only has $ 900 of the first customer's deposits, you can give that total to all three people.
But, the bank is not going to give the 900 thousand dollars in cash to its clients, but to the add to your bank accountThis means that money is basically invented from scratch, it is just a number in the bank account database. For this reason, the million dollars that was initially deposited will remain intact in cash, only 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. From this dynamic, the 900 thousand dollars will have been added to the financial system.
