money-supplyHow much money exists? Or, what are the ways for estimating the total amount of money, both paper and digital, existing in the world?
The motivation for asking this question: if the currency circulating in the globe were to be replaced (completely or partially) by a new kind of currency, how much of the new currency is enough?
There is a lot of debate on what money actually is. As some commenters before be have mentioned there are different definitions of “money” which can be really different from each other, where the differences go beyond the distinction “paper” and “digital” For example the definition “M_0” is just paper money and coins in circulation, “M_1” may be paper money and checking accounts.
Your question could be answered by checking the archives of the printers and the mints of the Central Banks, such as the FED in the US, for how much paper they have printed since their inception taking into account how much money did the Central Bank actually buy back since then by open market operations. Then you could go through the liabilities of the entire banking sector of a country to spot the ammounts saved in checking accounts.
This whole proccess is tedious and would provide you with little information though (how would one use such a measure?).
Edit to add an answer regarding the “lively circulating” money part.
EnergyNumbers is spot-on. Due to the nature of currency (if you just want to restrict yourself to just currency -coins and banknotes- as a measure of money) you can never be sure of the amount of currency in circulation. For example, if I inherit $1,000,000 in cash and burry it in my backyard, it is out of the circulation. Yet it is money that has been printed, and until the time I picked up my shovel, it was circulating. This measure of money is not interesting because it doesn’t really tell us anything.
You ask whether it would be possible to substitute the world currency by some other, even partially. But this happened all the time in history. Most recent example: the adoption of the Euro and the abolishment of the national currencies in the eurozone. Another example: moving from trading using salt in ancient times to trading using gold. Then the crude gold became gold coins. Then these gold coins gave way to pieces of paper that assured that they can be redeemed in gold by some proto-banks in Europe. Then this paper printing which was backed by gold became a state monopoly, and a little after that, in the 20th century, the gold backed currency was dropped altogether giving way to the fiat paper money.
In this sense, currency is circulating because people are willing to accept it. So if the entire population of Earth, was convinced to use matches or toothpicks for transactions then this would become a de facto currency. Such fenomena are often observed in periods of hyper-inflation: the pieces of paper called banknotes are no longer valuable and they aren’t used. People turn to barter economies.
So what we call money and currency changes all the time. What you need to take into account is what purposes money serves: primary it is a means of transaction, but also a means of storing values and an accounting unit.
There is no single value of “live money in circulation”. That’s true of any single currency, where the amount of money, by most classifications (M1, M2, M3, M4, M4L, etc) varies continuously.
It’s even more true of the aggregation of global currencies, given that many exchange rates float continuously, and thus the aggregation at any one moment is different to the aggregation at the next.
For several decades now, almost all of the developed world has functioned with a continuously-variable money supply, leading to an unparalleled growth in wealth and welfare.
The very nature of a varying money supply gives policy makers a bunch of tools to help the economy grow stably. Many of the problems of the Eurozone 2008-2012 were because of insufficient levers for countries to increase money supply in their own country, according to their own economy’s needs.
There are many definitions of money: the great strength of the currency systems we have in the developed world is that various liquidities of money can grow and shrink quickly according to particular economic circumstances.
For related questions, see:
All content is licensed under CC BY-SA 3.0.