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?