Clarification of Answer by
vercingatorix-ga
on
24 Feb 2005 15:22 PST
Here is the answer I promised you:
You are right to wonder about the availability of records in much of
the world. Even the government of many of these nations may not know
the money supply. The only organization able to track such things is
the World Bank. But while they track many pieces of financial data,
they do not track the money supply. However, I have come up with one
way to estimate the world money supply using reliable data. I?m going
to get the money supplies of large economic powers and extrapolate
them into a world money supply based on their combined control of the
world economy.
According to the Federal Reserve, here are the M1, M2, and M3 money
supplies as of January.
M1 - $1.353 trillion
M2 - $6.430 trillion
M3 ? $9.467 trillion
Obviously, you?re familiar with these numbers. Unfortunately, the M3
money supply is really impossible to calculate in many countries. The
European Central Bank keeps similar statistics, however. According to
the ECB ( HYPERLINK "http://www.ecb.int/press/pdf/md/md0412.pdf"
http://www.ecb.int/press/pdf/md/md0412.pdf), the M3 money supply for
the European Common Market was 6.529 trillion euros at the end of
December, the latest month for which data is available.
Based on the Feb. 23 spot exchange rate of $1.3211 per euro, the
European M3 money supply is $8.625 trillion in U.S. dollars. European
M2 is quite similar to the American M2. In U.S. dollars, the European
M2 is $7.352 trillion.
This article in the International Herald Tribune ( HYPERLINK
"http://www.iht.com/articles/2005/02/17/bloomberg/sxbriefs.html"
http://www.iht.com/articles/2005/02/17/bloomberg/sxbriefs.html) lists
the Chinese M2 money supply for January at 25.8 trillion yuan, or $3.1
trillion in U.S. currency. I visited the site of the People?s Bank of
China ( HYPERLINK "http://www.pbc.gov.cn/" http://www.pbc.gov.cn/ - a
useful site) and was not able to find the January 2005 number.
However, I checked out the growth of the money supply in 2004 at
HYPERLINK "http://www.pbc.gov.cn/english/diaochatongji/tongjishuju/gofile.asp?file=2004S14.htm"
http://www.pbc.gov.cn/english/diaochatongji/tongjishuju/gofile.asp?file=2004S14.htm
and determined that the newspaper?s figure is probably correct.
According to the Japanese central bank, the M2 money supply plus CD
balances totaled 700.3 trillion yen at the end of January ( HYPERLINK
"http://www.boj.or.jp/en/stat/stat_f.htm"
http://www.boj.or.jp/en/stat/stat_f.htm). Assuming an exchange rate of
104.89 yen per dollar, the Japanese money supply was $6.677 trillion.
Let?s recap:
M2 money supply:
U.S. $6.430 trillion.
EU $7.352 trillion.
China $3.1 trillion.
Japan $6.677 trillion.
While the definitions of the M2 money supply differ from country to
country, they are fairly similar. And that?s going to have to be good
enough, because there is no way to effectively strip out portions of
the numbers provided by the government, at least not without a team of
auditors with extremely high security clearances.
I have no idea about the money supply of Bangladesh or Botswana, but
the economies above represent the four largest economic forces in the
world. We could visit the central banks of a dozen countries to
further refine our estimate, but the four numbers listed above should
be sufficient for our purposes.
According to the CIA Factbook ( HYPERLINK
"http://www.cia.gov/cia/publications/factbook/geos/xx.html#Econ"
http://www.cia.gov/cia/publications/factbook/geos/xx.html#Econ) the
world?s gross domestic product was estimated at $51.48 trillion in
2003. In 2000, the CIA estimate was 2000 was $43.6 trillion. That
makes for an annualized growth rate of 5.69% from 200, through 2003.
Let?s assume a similar growth rate for 2004, and the estimated world
domestic product is $54.4 trillion.
We're going to determine the percentage of the world domestic product
that comes from the four powerhouses above. We'll use that percentage
to extrapolate the money supply for the world. Money supply tends to
be highly correlated with GDP, but the ratio of money supply to GDP
varies greatly from nation to nation, depending on their growth rates
and the composition of their economies.
However, while differences in growth rates and economic maturity of
developing nations will make future predictions very difficult, what
we?re doing is taking a snapshot of the global economy at a particular
moment in time. It's an inexact estimate, but one we can defend
logically and economically.
So, here is the GDP:
* Japan's GDP as of December 2004 was $530.8 trillion yen, or $5.061
trillion in U.S. currency.
* The U.S. GDP in the December quarter was $10.976 trillion.
* The EU reports GDP by quarter
(http://www.ecb.int/stats/prices/accounts/html/index.en.html#data),
with the latest figure available being the September 2004 quarter. The
trailing 12-month GDP for the EU is 7.470 billion euros, or $9.868
trillion in U.S. currency.
* China's GDP was $1.65 trillion for 2004
(http://www.chinadaily.com.cn/english/doc/2005-01/25/content_412097.htm)
I collected the Japan and U.S. GDPs from a proprietary database,
though they must be available on the Internet. I just grabbed them
from my database because it was faster.
The U.S., European Union, China, and Japan combine to generate about
$27.555 trillion in gross domestic product, which represents 50.65% of
the world domestic product.
For estimation purposes, we'll assume they also control 50.65% of the
world money supply. The four regions combine for an M2 money supply of
$23.559 trillion. That translates to a world money supply of $46.513
trillion.
V
Other interesting links:
Economists? estimates of the growth of the Chinese money supply.
HYPERLINK "http://news.xinhuanet.com/english/2005-01/06/content_2421706.htm"
http://news.xinhuanet.com/english/2005-01/06/content_2421706.htm
Japan Central Bank page.
HYPERLINK "http://www.boj.or.jp/en/" http://www.boj.or.jp/en/
Financial data for central governments.
http://www.worldbank.org/data/wdi2004/pdfs/Table4_11.pdf
Google Search Terms:
"money supply" world trillion 2005
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