How Much Money is There on Earth?

Hello, Vsauce. Miguel here. On Earth, the average currency changes hands about 55 times a year. That's about once a week. With that kind of turnover, it's safe to say that statistically in the United States, for every 100 coins, one was touched in the last year by someone who within the next year will commit murder. But how

much

cash, how

much

physical currency is there on

earth

? First things first, how much cash is inside the bank? Well, according to the FBI, a successful bank robbery costs an average of $10,000. But usually that's just

money

from the cash registers. In their vaults, an average bank may have between $10,000 and $100,000, and some larger banks can sometimes carry up to a few million in cash.

But what happens in our homes? How many loose change do we all have scattered on dressers or lost under cushions? Well, it's hard to pinpoint the exact number and many of the estimates vary. Last year, Lloyds TSB announced that in the UK the average person has around £14.15 lying around. A recent survey by VISA looked at several countries and included cash left at home, in the office and in the car. Their numbers are a little higher, but they agree with the US Treasury's estimate from a few years ago that the typical US household has between ninety and one hundred dollars lying around, which means that if Everyone in the United States gathered all their loose change and put it in one place they would have 15 billion dollars.

That's enough to finance 357 more seasons of Arrested Development. But what we wonder is how much cash is there on the entire planet. Well, that amount has a special name. It's called M0. It is an aggregate of all coins and bills. The most recent estimate from DollarDays.org values ​​this total amount, considering all countries' currencies, at just over the equivalent of 5 trillion US dollars. That number, the value of all of Earth's currency, M0, is enormous. But believe it or not, it represents less than 10 percent of all the

money

we humans have available to spend immediately. To explain it, we should look at how money is born.

In virtually every country on Earth, one of the ways new money can be born involves a central bank. Now, let's say that in our country the bank is run by Jake from Vsauce3. He is very smart and pays a lot of attention to our economy. If he believes that an increase in the money supply would help us, well, he can simply make more money. It is easy. It is not necessary to print it as currency to be born. The next step is commercial banks, such as Vsauce Bank. These are the banks that you and I use.

All the central bank needs to do is buy some things from these banks using the money it just earned and now the commercial banks have more money. There is another way money can be born. It involves commercial banks and gets to the heart of our question. If I go to the bank and deposit £5, the bank says great, we'll hold this money for you and any time you want, you can withdraw or spend that £5. The thing is, legally, banks only need to set aside a fraction of the money they receive. It is known as fractional reserve banking and occurs in virtually all countries.

It means that if someone else comes along, like, say, Kevin from Vsauce2 and wants to borrow some money, say, £3, the bank can lend them £3. And now, whenever he wants, he can spend these 3 pounds. But here's the thing: Kevin can spend £3 and I can spend £5 for a total of £8, even though there's only £5 in the bank. New money has been born. And if we want to count all the spendable money on Earth, we'll need to include this kind of money, the kind that fractional reserve banking creates. If we include that amount of money, we are now talking about a number much larger than M0.

Economists call this figure M1. M1 includes all physical currencies, as well as money that people can access quickly, such as money in checking accounts. Globally, in all countries and in all currencies, it is estimated that M1 is equivalent to 25 trillion US dollars. M2 is an even broader definition of money and includes things you can't necessarily spend right away. For example, savings accounts or CDs of less than one hundred thousand dollars. It is currently estimated that M2 globally is equivalent to 60 trillion US dollars. Finally, M3. This is a broad definition of money that includes all currencies, bills and coins, checking accounts, savings accounts, small CDs, and really large long-term deposits.

In the US economy, the Federal Reserve no longer even reports this figure, but as a measure of eventually spendable wealth it is real and if we consider M3, the global money supply, that gives us a figure equivalent to 75 trillion US dollars. Of all that money, how much is yours? Well, last week via Twitter, Mark Boadey introduced me to Global Rich List dot com. Enter your salary and find out how you compare to everyone else on Earth. By the way, you can act like a central bank and control the money supply yourself. It is illegal, but technically you can increase the money supply by counterfeiting and you can decrease the money supply by subtracting money.

For example, burn it. If you burn your own money, you become poorer, but because you have decreased the money supply, the power of everyone else's money increases and they become a little bit richer. Of course, given how much money there is on Earth and how much you could probably get your hands on and burn, your effect will be pretty imperceptible. One of the largest amounts of cash ever burned was by the KLF, who in the 1990s, for reasons no one is still sure of, burned through a million pounds in cash. It took them about 2 hours to burn through all that cash and they recorded the act on video.

You can also destroy money by eating it, like rapper Tyga did. But you probably shouldn't do that either because money is dirty. A study published in Applied and Environmental Microbiology reported that the flu virus can survive on cash for 1 hour to 2 days. And other studies have found that about 7 percent of cash contains viable strains of dangerous bacteria, such as those that cause pneumonia or those that come from feces. That's a lot of germs and those germs can be high. Studies have found that 92 percent of banknotes are contaminated with traces of illegal drugs, usually cocaine. In London, that figure has reached 99 percent.

It only takes a few exposed bills circulating normally for all cash to become contaminated. Encased within the fibers of a bill, there is an average of 28 micrograms of cocaine, meaning that in 5,000 bills there is enough cocaine for an entire line. These drug traces are almost impossible to remove from banknotes, so there is little risk of drugs being transferred to the skin. However, they can be detected by drug-sniffing dogs, and on more than one occasion, the courts have forced the police to return confiscated money, because even though the drug dogs detected drugs in the money, that's what money is.

As if that weren't enough, cash isn't nutritious either. Termites may eat cash, but for us humans, those of us who love these things so much, cash as we know it today, and indeed money, really has no intrinsic value. In a post-apocalyptic world, where nothing was stable and survival was a challenge, food, drinking water, AMOs, weapons, antibiotics, machines, fuel, trade, exchange and gifts of that kind of things would be our economy. When what is used as money has intrinsic value, is useful in itself, it is known as commodity money. It can also include precious metals, such as gold, whose rarity makes it likely to be accepted by other people for goods and services.

Now, when you can safely store all your products in one place and don't need to defend them or carry them everywhere, representative money often makes more sense. Store your valuables in a reliable place like a bank and get them some pieces of paper that say "yes, I own those things." Now you can walk around with some easy-to-carry strips of paper and use them to buy the things you want. Now we are closer to what we call money today. I say closer, because almost all the money we know today represents no real useful good anywhere on Earth.

This note does not represent how much food, water, gold, spices or video games I have stored in a bank, it is just money. It's called fiat money. Fiat is Latin for "let there be." And that kind of authoritarian command is exactly what gives fiat money its value. The people who make it have decreed that it is valuable. Because? Just let it be done. Because of this, the value of a fiat money depends on everyone believing that the people who make it will continue to exist and have the authority they already have. This means that the value of fiat money, unlike other commodities, can be forcibly erased.

Let's imagine that you live in the United States and you have a lot of dollars. Great job. Well, technically, Canada could invade and declare that the US dollar will no longer be accepted at all. Well, damn. Now you have a stack of paper, which at best is an incomplete deck of famous American flashcards. The important distinction here is that the invading Canadians could technically erase the value of fiat money. But nothing they said or did could make a commodity, like gold, any less valuable. Other countries would be happy to accept your gold and in return give you their own, still valuable coins.

No amount of force, authority, laws, or rules can make a commodity like clean water less important to drink or gold less scarce. On the other hand, the value of fiat money depends on our beliefs, on what we think. As long as we all believe that fiat money is valuable, it will be. This happens all the time. What we believe, what we think we know, can actually make those things come true. Real people, real objects, the way the universe works, and deities, like Zeus, can exist on their own whether we know them or believe in them. But some concepts require us to believe in them for them to be real.

And if no one believes them, they are literally not true. It's called the Tinkerbell effect and the value of fiat money is an oft-cited example. But what's really cool is the fact that there are situations where our convictions can destroy what we believe in. It's called the reverse Tinkerbell effect and it describes the situation as more and more people believe something that actually becomes less and less true. For example, the idea that driving a car is safe. As more and more people believe this, more people will go out driving and are likely to drive less cautiously, which ironically makes driving less safe.

Another example would be the idea that in an election your vote matters. As more and more people believe this, more people will go out to vote and the individual weight of each vote will decrease. It took a lot of work and tools to build civilization, find cures, and explore our solar system, but we must keep in mind that without doing anything at all we are still able to create. By simply believing in something we can make it truly real. In reality, other things can be destroyed if we simply believe in them. Can you believe it? And as always, thanks for watching.