Exploring the World’s Cash Supply and the Dominance of Digital Transactions

The world’s cash sup­ply, or mon­ey sup­ply, can be mea­sured in var­i­ous ways depend­ing on what type of mon­ey is includ­ed in the mea­sure­ment. Here’s a break­down based on recent data:

• M0 (Nar­row Mon­ey): This includes phys­i­cal cur­ren­cy (coins and ban­knotes) in cir­cu­la­tion. Accord­ing to recent data, the M0 sup­ply glob­al­ly was esti­mat­ed to be about $8.27 tril­lion US dol­lars. This fig­ure rep­re­sents mon­ey that can be used for trans­ac­tions imme­di­ate­ly.

• M1 Mon­ey Sup­ply: M1 includes M0 plus the most liq­uid forms of mon­ey, like demand deposits (check­ing accounts), trav­el­er’s checks, and oth­er check­able deposits. The M1 for the U.S. alone was $18.4 tril­lion in July 2023. Glob­al M1 would be sig­nif­i­cant­ly high­er, but exact fig­ures for the world’s total might not be com­pre­hen­sive­ly report­ed.

• M2 Mon­ey Sup­ply: This includes all of M1 plus sav­ings accounts, mon­ey mar­ket accounts, and small time deposits. It’s less liq­uid but still con­sid­ered part of the mon­ey sup­ply. The glob­al M2 has been report­ed to be around $106.3 tril­lion.

• M3 Mon­ey Sup­ply: Although some cen­tral banks have stopped report­ing M3, it includes M2 plus large time deposits, insti­tu­tion­al mon­ey mar­ket funds, and oth­er less liq­uid assets. When reports were still being made, M3 could be sig­nif­i­cant­ly larg­er than M2 due to the inclu­sion of these less liq­uid assets.

• Total Mon­ey Sup­ply Includ­ing Broad­er Def­i­n­i­tions: If you con­sid­er broad mon­ey (which includes sav­ings, invest­ments, and even cryp­tocur­ren­cies), the total could be well over $90.4 tril­lion, poten­tial­ly reach­ing into the quadrillions when includ­ing deriv­a­tives, invest­ments in real estate, and oth­er finan­cial instru­ments.

• Recent Trends: Posts from X indi­cate that the glob­al mon­ey sup­ply has been increas­ing, with fig­ures like $107 tril­lion being men­tioned for M2, show­ing a sig­nif­i­cant upward trend in glob­al liq­uid­i­ty.

Remem­ber, these fig­ures can change due to eco­nom­ic activ­i­ties, mon­e­tary poli­cies, and the inclu­sion or exclu­sion of dif­fer­ent types of finan­cial instru­ments in the mon­ey sup­ply cal­cu­la­tions. The num­bers pro­vid­ed here reflect the most recent data avail­able from the sources up to 2024, but for the most cur­rent fig­ures, one would need to look at the lat­est reports from finan­cial insti­tu­tions, cen­tral banks, or eco­nom­ic analy­ses.

Based on the infor­ma­tion from var­i­ous sources and posts on X, only about 8% of the world’s cur­ren­cy exists as phys­i­cal cash, which would include the cash avail­able for peer-to-peer trans­ac­tions. This fig­ure sug­gests that the vast major­i­ty of cur­ren­cy trans­ac­tions today are dig­i­tal, via online bank­ing, pay­ment apps, or oth­er elec­tron­ic means, rather than involv­ing phys­i­cal cash.

How­ev­er, it’s worth not­ing that:

• Phys­i­cal Cash: This 8% rep­re­sents all phys­i­cal cash in cir­cu­la­tion, not specif­i­cal­ly the por­tion used for peer-to-peer trans­ac­tions. While some of this cash is indeed used for direct exchanges between indi­vid­u­als, a sig­nif­i­cant amount might also be held in reserves, used in ATMs, or kept by busi­ness­es for trans­ac­tions.

• Peer-to-Peer Trans­ac­tions: These can occur with both phys­i­cal cash and through dig­i­tal means. With the rise of dig­i­tal pay­ment apps like Ven­mo, Pay­Pal, Cash App, and oth­ers, many peer-to-peer trans­ac­tions now bypass phys­i­cal cash entire­ly, using dig­i­tal trans­fers instead. There­fore, the actu­al amount of cash on the street for P2P trans­ac­tions would be a frac­tion of that 8%, as dig­i­tal meth­ods have become increas­ing­ly pop­u­lar for such exchanges.

In sum­ma­ry, while it’s dif­fi­cult to pin­point the exact por­tion of the 8% cash sup­ply used specif­i­cal­ly for peer-to-peer trans­ac­tions, it is cer­tain­ly a small frac­tion of that per­cent­age, with dig­i­tal meth­ods like­ly dom­i­nat­ing the space for these types of exchanges today.

To esti­mate the val­ue of the 8% of the world’s cur­ren­cy that exists as phys­i­cal cash:

1. Cur­rent Data on Glob­al Mon­ey Sup­ply:

   • The M0 mon­ey sup­ply, which includes phys­i­cal cur­ren­cy like notes and coins, was esti­mat­ed to be around $8.27 tril­lion US dol­lars as per the lat­est avail­able data from RankRed (2024).

2. Cal­cu­la­tion:

   • If 8% of the world’s cur­ren­cy is phys­i­cal cash, then we can direct­ly use this fig­ure as it rep­re­sents the val­ue of phys­i­cal cur­ren­cy in cir­cu­la­tion. How­ev­er, to align with the com­mon under­stand­ing that this 8% refers to a broad­er mea­sure, let’s con­sid­er the fol­low­ing:

   • The total broad mon­ey (M2 or M3), which includes phys­i­cal cash, sav­ings accounts, mon­ey mar­ket accounts, and oth­er less liq­uid assets, is sig­nif­i­cant­ly high­er. For instance, the glob­al M2 was men­tioned to be around $106.3 tril­lion.

   • If we take 8% of this total broad mon­ey:

     • Val­ue of Phys­i­cal Cash = 0.08 × 106.3 tril­lion USD = 8.504 tril­lion USD

   This cal­cu­la­tion gives us an esti­mate slight­ly high­er than the report­ed M0, which might be due to var­i­ous fac­tors like the inclu­sion of some very liq­uid assets in M1 or dis­crep­an­cies in data sources. How­ev­er, for sim­plic­i­ty and con­sis­ten­cy with the giv­en per­cent­age:

3. Con­clu­sion:

   • The val­ue of the phys­i­cal cash, being 8% of the world’s total cur­ren­cy if we con­sid­er the broad­est mea­sure of mon­ey sup­ply, would be approx­i­mate­ly 8.5 tril­lion USD.

This fig­ure aligns with the con­cept that phys­i­cal cash rep­re­sents a small, yet sig­nif­i­cant, por­tion of the total mon­ey sup­ply, tak­ing into account the dig­i­tal nature of mod­ern economies where most trans­ac­tions occur elec­tron­i­cal­ly. Remem­ber, these fig­ures are based on esti­mates and should be treat­ed as rough approx­i­ma­tions due to the dynam­ic nature of cur­ren­cy cir­cu­la­tion and eco­nom­ic poli­cies.