exchange

How Much Money is There on Earth?

Hey, Vsauce. Michael here. On Earth

the average piece of 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 out of every 100 pieces of currency

one was most likely 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 of bank? Well, according to the FBI,

the average successful bank robbery involves 10,000 dollars.

But that's usually just currency from the tellers

tills. In their vaults, the average bank might have anywhere from 10,000

dollars

to a 100,000 dollars with some larger banks at times

carrying as much as a few million in cash.

But what about in our homes? How much loose change do we all have scattered on

dressers

or lost under cushions? Well, it's tough to

accurately figure out the exact number and many of the estimates vary.

Last year, Lloyds TSB announced that in the UK

the average person has about £14.15 just

lying around. A recent survey by VISA looked at a bunch of countries

and included cash left at home, the office,

and in the car. Their figures are a tad higher,

but agree with the US Treasury's estimate of few years ago

that the typical US household has ninety

to a hundred dollars just laying around,

which means that if just everyone in America scrounged up all of their loose

change

and put in one place, they would have 15

billion dollars. That's enough to fund

357 more seasons of Arrested Development.

But we are asking about how much cash

there is on the entire planet. Well, that amount has a special name.

It is called M0.

It's an aggregate of all coins and banknotes.

DollarDays.org's most recent estimate

values this total amount, considering all currencies in countries,

at just slightly over the equivalent of 5

trillion US dollars. That number,

the value of all of the currency on Earth,

M0, is huge. But believe it or not,

it represents less than 10 percent

of all of the money we humans have available to spend

right away. To explain, we should look at how

money is born. In pretty much 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's really smart

and he pays close attention to our economy. If he feels

that an increase of the money supply would help us, well,

he can just make more money.

It's that easy. It doesn't need to be printed as currency

to be born. The next step involves the commercial banks,

like the Bank of Vsauce. 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 made

and now the commercial banks have more money. There's 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 pounds,

the bank says fantastic, we will hold on to this money for you

and at anytime you want, you can withdraw or spend

these 5 pounds. The thing is, legally,

banks only need to reserve a fraction

of the money that they are given. It is known as fractional reserve banking

and it pretty much happens in every country. It means

that if someone else comes along, like, say, Kevin from Vsauce2

and he wants to borrow some money, say, 3 pounds,

the bank can lend him 3 pounds. And now, whenever he wants he can

spend these 3 pounds. But here's the thing:

Kevin can spend 3 pounds and I can spend 5

for a total of 8, despite the fact that there are only 5 pounds

in the bank. New money has been born.

And if we want to count all of the spendable money

on Earth, we're going to need to include this type of money, the kind that

fractional reserve banking

creates. If we include that kind 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,

like money in checking accounts. Globally,

across all countries and all currencies, M1 is

estimated to be the equivalent of 25

trillion US dollars.

M2 is an even broader definition of money

and it includes things that you can't necessarily spend right away.

For instance, savings accounts or CDs

under a hundred thousand dollars. M2, globally,

is currently estimated to be the equivalent of 60

trillion US dollars. Finally,

M3. This is a broad definition of money that includes

all currencies, banknotes and coins, checking accounts,

savings accounts, small CDs and really big, long time deposits.

In the American economy, the Federal Reserve doesn't even report this figure

anymore,

but as a measure of eventually spendable wealth it's real

and if we consider M3 the global money supply

that gives us a figure that is equivalent

to 75 trillion

US dollars. Of all that money,

how much of it is yours? Well, last week

over Twitter, Mark Boadey introduced me to Global Rich List

dot com. Enter your salary and figure out how you stack up

against everyone else on Earth.

By the way, you can act just like a central bank

and control the money supply yourself.

It is illegal, but you can technically increase the money supply

by counterfeiting and you can decrease the money supply

by subtracting money. For instance,

burning it. If you burn your own money,

you become poorer, but because you've decrease the money supply,

the power of everyone else's money goes up and they become a tiny tiny bit

richer. Of course, given the amount of money

on Earth and the amount that you could probably get your hands on and burn,

your effect will be quite imperceptible.

One the largest amounts of cash ever burned was done by KLF,

who in the nineties for reasons

no one's still quite sure of, burned a million

pounds worth of cash. It took them about

2 hours to burn all of that cash and they recorded the act

on video. You can also destroy money

by eating it, like the 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

carries viable strains of dangerous bacteria,

like those the cause pneumonia or those that come from

feces. That is a lot

of germs and those germs might be high.

Studies have found that 92 percent of banknotes

are contaminated with traces of illegal drugs, typically

cocaine. In London that number has been as high as 99 percent.

All it takes is for a few exposed

bank notes to circulate normally for all of the cash

to become contaminated. Locked within the fibres of a banknote,

there's an average of 28 micrograms

of cocaine, which means that in 5,000 banknotes,

there's enough cocaine for an entire

line. These drug traces are nearly impossible to remove from bank notes,

so there's little risk of the drugs transferring to your skin.

However, they can be detected by drug sniffing dogs

and, on more than one occasion, courts have forced police to return confiscated

cash,

because even though drug dogs detected drugs on the cash,

that's just how cash is.

As if that wasn't enough, cash is

also not nutritious. Termites can eat cash,

but to us humans, the ones who love this stuff so much,

cash as we know it today and, for that matter, money

doesn't really have any intrinsic value.

In a post-apocalyptic world, where nothing was stable

and survival was a challenge, food,

clean, water, AMO, weapons, antibiotics, machines,

fuel, the trade and exchange and gifting

of those types of things would be our economy.

When what you use as money has an intrinsic value, it's useful

in and of itself, it is known as commodity money.

It can also include precious metals, like gold,

whose rarity makes it likely to be accepted by other people

for goods and services. Now, when you can safely store all of your commodities in

one place

and you don't need a defend them or lug them around everywhere,

representative money often makes more sense.

Store your valuables in a trusted place like a bank

and get some slips of paper from them, saying "yeah, I

own that stuff." Now you can walk around with some easy to carry slips of paper

and use those to buy the things that you want.

We are now closer to what we call money today.

I say closer, because almost all money that we know of today

doesn't represent any actual useful commodity

anywhere on Earth. This note doesn't represent how much food or water or gold

or spices or video games I have stocked up in a bank,

it just is money.

It's called fiat money. Fiat is Latin for "let

it be done." And that kind of authoritative command is exactly what

gives fiat money

its value. The people who make it have decreed

that it is valuable. Why?

Just let it be done. Because of this,

the value a fiat money depends on everyone believing

that the people who make it will continue to exist and have the authority

that they already do. This means that the value of fiat money,

unlike other commodities, can be erased

by force. Let's imagine that you live in America and 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,

shucks. You now have a bunch of paper, which at best

is a incomplete deck of famous American

flashcards. The important distinction here

is that invading Canadians could technically

erase the value of fiat money.

But nothing they said or did could make a commodity,

like gold, less valuable. Other countries would still be glad to take your gold

and in return give you their own, still valuable,

currencies. No amount of force

or authority or laws or rules can make a commodity like potable water

any less important to drink or gold

any less rare. On the other hand, the value of

fiat money depends on our beliefs,

what we think. So long as we all believe

that fiat money is valuable, it is.

This happens all the time. What we believe,

what we think we know, can actually cause those things

to become true. Actual people, real

objects, the way the universe works and deities,

like Zeus, can exist all by themselves, whether we know about them

or believe in them. But some concepts

require us to believe in them for them to be real.

And if no one believes in them, they literally

aren't true. It's called the Tinkerbell

effect, and the value of fiat money is an often-cited example.

But what's really cool is the fact that there are situations where

our convictions can actually destroye

the very thing we believe in. It's called

the reverse Tinkerbell effect and it describes the situation,

whereas more people believe something that

thing 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 they are likely to drive less cautiously,

ironically making 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 and vote

and the individual weight of each vote will go down.

It took hard work and tools

to build civilization and find cures and explore our solar system,

but we should keep in mind that without doing anything at all

we are still capable of creation.

By merely believing in something we can make it

actually truly real.

Other things can actually be destroyed,

if we merely believe in them.

Can you believe that?

And as always,

thanks for watching.