All the money in the world

OK, the amount of money in the world is not infinite. Given that the US is about to spend $750 billion on defense, I was curious how much money there is in the world. How much money the US has, how many dollars China has. So here are some statistics for the curious. I don't try to make any conclusions here, that is for another blog, but I wanted at least to get a sense of perspective of the available cash in the world.

A calculation in January 2009 was done by Mike Hewitt of the economics blog DollarDaze.com. Hewitt calculated that in October 2008, there was about (in notes and coins of countries that comprised about 97% of the world's GDP) the equivalent of $3.94 trillion in U.S. dollars in circulation [source: Hewitt].

M0 is the amount of outstanding notes and coins in circulation. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 in the US [source: Federal Reserve].

Thus, about 25% of money (cash) circulating in the world is American dollars.

The global market capitalization for all stock markets that are members of the World Federation of Exchanges was $32.5 trillion by the end of 2008.[http://www.world-exchanges.org/about-wfe] [2008 WFE Annual Report, p. 84]. By comparison, the New York Stock Exchange capitalization is $28.5 trillion as of May 2008. [http://en.wikipedia.org/wiki/New_York_Stock_Exchange].

Just for thought, cash in the US = $908 billion, market cap of NYSE = $28 trillion.

Getting back to the US and the rest of the money, after all there is more money than $900 billion. The rest of the money is held in bank accounts of various types, and the Federal Reserve tracks these funds in three different values known as the M1, M2 and M3 money supplies:

M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In July 2009, the M1 money supply for U.S. dollars equaled about $1,655.6 billion [source: Federal Reserve].

M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and small CDs. In July 2009, the M2 money supply was about $8,326.8 billion [source: Federal Reserve].

M3 is M2 plus all of the large CDs. As of March 2006, the Fed no longer tracks the M3 money stock as an economic indicator. That month, M3 totaled around $10.3 trillion [source: St. Louis Fed].

[http://money.howstuffworks.com/how-much-money-is-in-the-world.htm]

And lest we forget, the current US debt is $12,346,427,470,024.01, about $12.3 trillion. That is 4 times the total amount of cash in the world, to put it in perspective. Furthermore it is more than M3, total money in the US. [http://www.treasurydirect.gov/NP/BPDLogin?application=np]. Where there is debt there are interest payments. The annual interest payments by the US is about $400 billion annually. [http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm]

So how do we get out of this mess?

US and China

When it comes to trade, according to the US Census Bureau, the US deficit with China in 2009 was about $208 billion (excluding December).http://www.census.gov/foreign-trade/balance/c5700.html.

At the same time China held about $2.4 trillion in foreign reserves, of which it seems that $2.1 trillion is in US dollars. That is more than 2 times the amount of total cash in circulation in the US. [http://en.wikipedia.org/wiki/Foreign_exchange_reserves]. [http://news.xinhuanet.com/english/2009-07/15/content_11710420.htm]

Furthermore, the US debt to China, in form of US Treasuries, is around $800 billion as of Nov. 2009. [http://en.wikipedia.org/wiki/United_States_public_debt], [http://www.ustreas.gov/tic/mfh.txt].

Enough information for now, more to come so that we can make some conclusion about what it means to have a Federal budget of over $1 trillion and where will the money come from.