Currency Wars: Stacking up the World’s Largest Currencies
Money makes the world go ‘round. But, which currencies and assets make up most of the money supply? To find the answer, it takes a little more than looking at the total amount of currency in the world. The world’s money supply includes currency, cryptocurrency, precious metals, and any other liquid instruments circulating in the world’s economy.
To help get a better idea of the world’s money supply, we put together a visualization to show how much money is circulating throughout the world.
- Central banks may be able to increase the money supply by cutting rates.
- Gold is the largest contributor to the world’s currency at $8.7 trillion.
- Cryptocurrency may stop central banks from altering the world’s money supply.
- Changes in the money supply can have a significant impact on inflation and other variables of macroeconomics.
To find out how much money there is in the world, we took data from the FED and each country’s central bank. Using this data, we can see how much money is circulating in the world economy as well as which instruments contribute the most to the money supply.
The Most Valuable Currencies in Circulation
1. Gold: $8.7 trillion
2. U.S. Dollar: $1.7 trillion
3. Eurozone Euro: $1.3 trillion
4. Silver: $1.1 trillion
5. China Renminbi: $1 trillion
The answer to the question, “How much money is in the world?” is a little bit more complex than you might think.
Money supply refers to the total amount of money in circulation at any given point in time. Banks work off the fractional banking system. The system allows banks to hold less on hand for withdrawal. They can then lend out the remainder. The amount they can lend out relative to what they keep on hand is known as the deposit multiplier.
When looking at this through a narrow lens, we might only consider the world’s currencies as part of the money supply. However, in a broader sense, we can consider other instruments, such as precious metals and cryptocurrency, as part of the money supply.
Looking at it through this broader lens, we can see that the world’s money supply is dominated by gold and the U.S. dollar. And, perhaps to some people’s surprise, the cryptocurrency, Bitcoin, has become one of the largest contributors to the world’s money supply.
Recently, due to major concerns regarding future economic growth, central banks around the world have been cutting interest rates in order to avoid a downturn, which increases the money supply. Increased supply lowers interest rates. This makes borrowing for investment more lucrative to businesses, but hurts savers.
It’s important to be able to understand and analyze the money supply as it can have a significant impact on macroeconomics around the world.
Understanding the state of the world’s money supply is not only interesting, but it can also help us protect against downturns in the world economy. It helps you understand what central banks do and why they do it.
Are you concerned about the state of the world economy? How do you think cryptocurrency will impact the world’s finances in the future? Let us know in the comments.
Data: Table 1.1