Mar 22, 2017

Question: What Percentage of the Money Supply Is In Physical Coins and Currency?

Answer: About 10% of the $60 trillion of money worldwide.

Hat tip to Big Picture Blog for the idea for this blog post. They had a guest on their podcast, Yuval Noah Harari, who had this to say about money:

Harari describes money as a “collective fiction.” He notes that the total value of money worldwide is $60 trillion dollars, of which a mere $6 trillion is in cash or coins. This means 90 percent of all money is nothing more than entries in a computer server. Money, says Harari, is a “faith based object,” whose value is derived by the shared narrative about its worth.

This idea of a faith-based object explains the importance of trust in banking relationships. When that trust is lost, as in the case of this national bank that opened unauthorized accounts, customers vote with their feet.

Ask most people what percentage of THEIR money supply is in coins and currency and I’m guessing they would put it at a much lower percentage. Who carries cash today anyway? Kinda makes you wonder…


Interested in this money theme? Here is a video your students might like (with questions): How Much Money Have Humans Created?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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