How much actual money is there in the world?

To make this question answerable in a finite amount of time, let's simplify things and ask, "How much money is there in actual United States dollars?" Since the statistics for the U.S. are easy to come by, we can examine this question in a couple of different ways.

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today and added them all up, how much money would you have? All of that hard and easily liquidated currency is known as the M0 money supply. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all of the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 [source: Federal Reserve]. That sounds like an incredible amount, but think about it this way: According to the CIA, there were 307,212,123 Americans alive that month [source: CIA]. If you took all the cash and divided it up equally, each person should have about $3,000 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas [source: Federal Reserve]. 

The rest of the money is held in bank accounts of various types, and the Federal Reserve tracks these funds in three different values known as the M1, M2 and M3 money supplies:

M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In July 2009, the M1 money supply for U.S. dollars equaled about $1,655.6 billion [source: Federal Reserve].

M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and small CDs. In July 2009, the M2 money supply was about $8,326.8 billion [source: Federal Reserve].

M3 is M2 plus all of the large CDs. As of March 2006, the Fed no longer tracks the M3 money stock as an economic indicator. That month, M3 totaled around $10.3 trillion [source: St. Louis Fed].

All told, anyone looking for all of the U.S. dollars in the world in July 2009 could expect to find around $8.3 trillion in existence.

Even though the Fed can't say precisely where all the U.S. dollars are in the world, it does try to keep track of how much exists. Not every nation in the world has a well-established central bank, though. Find out why it's so difficult to track exactly how much money exists in the world on the next page.

The Difficulty of Tracking Cold, Hard Cash

When a federal government finds itself in a bind, it's usually tempted to mint its way out of trouble. Printing money can easily solve many spending problems. While it can help in the short term, it does tend to present enormous long-term problems. The Zimbabwean dollar is an excellent recent example of this phenomenon.

In 2000, an exodus of much of Zimbabwe's labor pool led to a collapse of the country's financial system. To support public project spending, the government finance ministry printed surplus Zimdollars -- too many, in fact. Economically speaking, money is like any other commodity: It loses its value when there's an abundance of it. A surplus of readily available money in circulation leads to inflation, where money has less purchasing power. In the first decade of the 21st century, Zimbabwe's economy entered hyperinflation. Economists watching the startling loss of value of the Zimbabwe dollar estimated that it was losing value so quickly that its decline was equivalent to prices doubling in stores every 1.3 days. This puts the annual inflation rate Zimbabwe experienced by the end of 2008 at 516,000,000,000,000,000,000 (quintillion) percent [source: Berger].

The Zimbabwean government decided to fight fire with fire and printed even more money in higher denominations. Eventually, the country would produce a $100 trillion Zimbabwean dollar note -- which had an exchange rate of about 30 U.S. dollars (USD) in January 2009 [source: BBC]. The government would go on to abandon its currency entirely, opting instead to adopt the U.S. dollar and South African rand as official currencies.

But what about all those trillion-dollar notes that the country's finance ministry produced in 2008? Zimbabwe shows how difficult it can be to keep track of how much money a single nation has in the global markets, let alone how much money there is in the world.

However, this inherent difficulty hasn't stopped some from trying. Perhaps the closest estimate to how much money exists in the world was released in January 2009 by Mike Hewitt, editor of the economics blog DollarDaze.com. Hewitt tracked the reporting of 73 currencies from central banks and financial ministries in 90 countries, which cover the money used by 84.1 percent of the world's population. The countries tracked represent 96.7 percent of the world gross domestic product -- the market value of the world's economies combined. Hewitt found that in October 2008, these countries had notes and coins equaling $3.94 trillion in U.S. dollars in circulation [source: Hewitt]. That's a lot of moolah.

Things would be a lot easier on Mike Hewitt and foreign exchange market analysts if there was only a single currency used by every country on the planet. So why don't we?

Pros and Cons of a Universal Currency

The concept of a single worldwide currency has been suggested since the 16th century, and came close to being instituted after World War II -- yet the idea remains little more than that. Proponents argue that a universal currency would mean an end to currency crises like Zimbabwe's. A single currency wouldn't be subject to exchange rate fluctuations because there would be no competing currencies to exchange against. In other words, a universal currency would lose its value as a commodity bought and sold on open markets and would have value only for its worth in buying other commodities. To put it plainly, money would become just money. Its purchasing power would be the result of the adjustment of interest rates and other monetary policy tools in response to inflation or deflation.

Who would be responsible for adjusting those interest rates, though?

One of the chief fears among opponents of a universal currency is the creation of a central body formed to oversee the monetary policy for a single world currency. An extant international body, the United Nations (UN), provides an example of the potential pitfalls and strength a central global monetary body could expect. Successes like peace-building missions in nations as disparate as El Salvador, Mozambique and the former Yugoslavia attest to the power a unified international body can have to resolve conflict. On the other side of the coin, the UN's Intergovernmental Panel on Climate Change (IPCC) is widely accused of replacing science with diplomacy, as nations responsible for contributing to climate change aren't openly taken to task in IPCC reports.

These reasons and others continue to prevent the adoption of a universal currency. Perhaps closer on the horizon is the integration of separate currencies within regions into unified currencies. This has already occurred in some areas. The Euro is lauded as a successful regional currency and consistently trades at values above the dollar, despite being introduced only in 1999. Eight West African nations share a common currency, the Franc of the African Financial Community (CFA F). In the Western hemisphere, the creation of the amero has been suggested as a possible currency for a proposed currency union between the U.S., Canada and Mexico. Central American nations are also discussing a single currency proposal for the region.

Whether the proposed regional currencies will be instituted remains to be seen. They face the same criticism as a universal currency, albeit on to lesser degrees and on smaller, regional scales.

In the meantime, while the debate over regional and universal currencies continues, people like Mike Hewitt will have to count money the old fashioned way.

Lots More Information

Related HowStuffWorks Articles

• How the Fed Works
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• If all the money in the U.S. only totals $6 trillion, how can the NY Stock Exchange have stocks valued at $15 trillion?
• If you took all of the gold in the world and put it in one place, how much would there be?
• How Currency Works
• How Exchange Rates Work
• What do the symbols on the U.S. $1 bill mean?
• Why are the penny and the nickel the only U.S. coins with images that don't face left?

More Great Links

• Components of M1, Non-M1 M2, and Non-M2 M3
• M1, M2, and M3
• Money - What it is, How it works
• History of Money
• First Union/Wachovia: Economic Commentary

Sources

• Banque Centrale des Etats de l'Afrique de l'Ouest. "The West African Monetary Union." Accessed August 19, 2009. http://www.bceao.int/internet/bcweb.nsf/pages/uumoa1
• Berger, Sebastien. "Zimbabwe hyperinflation 'will set record within six weeks'." The Telegraph. November 13, 2008. http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/3453540/Zimbabwe-hyperinflation-will-set-world-record-within-six-weeks.html
• Central Intelligence Agency. "The World Factbook -- United States." July 30, 2009. https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
• Evans-Pritchard, Ambrose. "A 'copper standard' for the world's currency system?" The Telegraph. April 15, 2009. http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
• Federal Reserve Bank. "Factors affecting reserve balances." July 30, 2009. http://www.federalreserve.gov/releases/h41/20090730/
• Federal Reserve Bank. Personal correspondence. August 18, 2009.
• Federal Reserve Bank. "Table 1; money stock measures; billions of dollars." August 13, 2009. http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
• Go Currency. "A universal currency." Accessed August 19, 2009. http://www.gocurrency.com/articles/universal-currency.htm
• Ground Report. "The logic of one world currency." August 12, 2009. http://www.groundreport.com/Business/The-Logic-of-One-World-Currency
• Hamilton, Adam. "Big inflation coming 2." Zeal. June 5, 2009. http://www.zealllc.com/2009/biginf2.htm
• Hewitt, Mike. "Growth of global money supply." Dollar Daze. January 12, 2009. http://dollardaze.org/blog/?post_id=00565
• Shaw, Angus. "Half-life of the Zimbabwean dollar: dead, but still used for political debates and for bus fare." Associated Press. August 16, 2009. http://www.courant.com/news/nationworld/wire/sns-ap-af-zimbabwe-zimdollar,0,7638372.story
• St. Louis Federal Reserve Bank. "M3, M3 money stock (discontinued series)." March 13, 2006. http://research.stlouisfed.org/fred2/graph/?s[1][id]=M3
• The Big Picture. "Money supply and the end of M3." November 14, 2005. http://bigpicture.typepad.com/comments/2005/11/money_supply_an.html