Comparing Monetary Supplies, Crypto Currencies and Trust

INTRODUCTION

I was surprised to discover no readily available list of worldwide monetary supplies denominated in a common unit like dollars or ounces of gold but such a list is easily calculable from publically available data. Here, I use M2 data from the World Bank and the United Nations’ list of exchange rates. I repeated the calculation using M1 data from the Trading Economics data service.

A spreadsheet containing this analysis is available here.

So what do the numbers reveal and how do crypto currencies compare?

MOST VALUABLE M2 MONETARY SUPPLIES (in trillions of dollars)

1. All Euros

$21.69 Trillion
2. China

15.89
3. United States

14.10
4. Japan

11.68
5. Germany

6.13
6. France

4.25
7. United Kingdom

3.87
8. Italy

3.43
9. Spain

2.65
10. Canada (2008 data)

1.97
11. Netherlands

1.90
12. Korea, Rep.

1.65
13. Brazil

1.56
14. Australia

1.38
15. India

1.26
16. Switzerland

1.20
17. Russian Fed.

0.98
18. Hong Kong SAR

0.88
19. Austria

0.72
20. Belgium

0.68

 
 

MOST VALUABLE M1 MONETARY SUPPLES

1. Euro Total

$7.03 Trillion
2. Japan

5.73
3. China

5.07
4. United States

2.55
5. United Kingdom

1.86
6. Germany

1.84
7. France

1.07
8. Italy

1.04
9. Spain

0.70
10. Canada

0.68
11. Switzerland

0.59
12. Netherlands

0.46
13. Korea, Rep.

0.44
14. Russian Fed.

0.42
15. India

0.32
16. Saudi Arabia

0.26
17. Australia

0.25
18. Luxembourg

0.21
19. Austria

0.19
20. Hong Kong SAR

0.18

 
 
One surprise (for my American mentality) is that dollars are not the biggest, nor second biggest monetary supply in terms of value. They are third or fourth biggest depending on whether one considers M2 or M1.

Please note, the data is imperfect: the M1 data is newer than the M2 data, but the difference in M2 versus M1 ranking also speaks to great differences in banking structure and practices in various countries.

The main difference between M2 and M1 is that M2 includes savings and money market accounts. The proportion of M2 to M1 varies widely between countries. Though the ratios may be off because some data is older than other data, in the United States, M2 is more than five times bigger than M1. In Luxembourg, it’s only 1.3 times bigger. In Saudi Arabia, it’s 1.5 times bigger.

COMPARING M2 WITH CYPTO CURRENCIES

As of the time of this writing (September 7th, 2013), all the Bitcoins in the world are worth about $1.39 Billion. That makes their supply slightly less valuable than the M2 monetary supplies of Chad, Guyana, Montenegro, but slightly more valuable than the M2 monetary supplies of Mauritania, the Maldives, Belize, El Salvador, Malawi and Tajikistan. Bitcoins are on the map!

All the Litecoins in the world are worth about $59 million dollars, which is a little better than half the value of the smallest M2 monetary supply reported by the World Bank, that of Sao Tome and Principe.

MEASURING VALUE PER NOTE

The methodology behind this last analysis is speculative, but interesting nonetheless. What if we measured the value-per-note of all mediums of exchange? What if we counted all the notes in the world (Dollars, Euros, Litecoins, Vietnamese Dongs, Yen, Rubles, Lira, etc), and then counted the value of all the notes. For any currency, we could then compare their percentage of world-wide notes to their percentage of value of all the monies.

For example, imagine a world in which only two mediums of exchange were used: Roman’s Rubles and Mises’s Marks. Imagine that a million of each circulated, but Mises’s Marks were three times as valuable as the Rubles.

It’s easy to quantify the difference. Mises’s Marks represent three quarters of the value and only half of the notes. This can be described by a factor of 1.5. Roman’s Rubles also represent half the notes, but only one quarter of the value. They can be given a factor of 0.5.

A real-world example would be comparing Vietnam’s money, the Dong to the Euro. Taken note for note, the Dong represents a quarter of all the money in circulation, but only 0.15% of the value (when considering M2). The Euro is almost the exact converse. Euros represent 0.15% of the notes, but a quarter of value of all mediums of exchange in this analysis.

What conclusions be gleaned from this data? Most interestingly, is this factor (percent of value divided by percent of notes) in any way measure trust?

Several methodological concerns come to mind:

1) Aggregating all mediums of exchange, including Tide, gold and pig tusks (used as a medium of exchange on Pentecost Island in Vanuatu) seems like the best approach. In this analysis, only M2 data and the two most valuable crypto currencies, Bitcoin and Litecoin, are considered.

2) How would gold be incorporated into this analysis, since there is no single obvious unit to represent a note? People trade in grams, ounces, bars, tonnes.

3) Should crypto currencies be compared with M2, M1, or not at all? The ranking of trust factors was similar for M2 data and M1 data.

4) Can value per note be a meaningful measure of trust or anything else? Perhaps monetary discipline? What correlations can be found with this ratio?

With these concerns in mind, here is a list of the most and least trust monies using M2 data:

MOST TRUSTED

1. Bitcoin 15,589
2. Kuwaiti Dinar 456
3. Litecoin 370
4. Bahraini Dinar 345
5. Oman Rial 337
6. Latvian Lats 245
7. U.K. Pound 198
8. Jordanian Dinar 183
9. Euro 172
10. Azerbaijan Manat 166
11. Swiss Franc 140
12. US Dollar/Bahamian Dollar/Panama Balboa 130
13. Australian Dollar 118
14. New Zealand Dollar 104
15. Singapore/Brunei Dollar/Libyan Dinar 102

 
China’s Renminbi: 21.2
Japanese Yen: 1.3

CLOSEST TO PROPORTIONAL TRUST

(% money supply = % value of money supply)

Sri Lankan Rupee 0.987
Icelandic Krona 1.090

LEAST TRUSTED

1. Iran 0.0052
2. Vietnam 0.0061
3. Sao Tome Principe 0.0070
4. Indonesia 0.013
5. Belarus 0.015
6. Laos 0.017
7. Paraguay 0.029
8. Sierra Leone 0.030
9. Cambodia 0.032
10. Uganda 0.050

 

CONCLUSION

Though the Bitcoin economy may still be small, the fact of it being larger than many national monetary supplies — after only five years, no less — makes its dismissal by lingering critics downright silly. (Not that the “honey badger of money” cares much about its critics.) The value-per-note analysis is even more surprising. If indeed the relative trust of various currencies can be measured by comparing value-per-note, then Bitcoin is already the champion (precious metals not considered), and Litecoin is threatening to take second place.

4 Comments

      1. Ed K

        You did not include Ukraine?

        Canada?

        Cayman Islands?

        Guatemala?

        These are places we people are investing… or
        transferring wealth?

        While Canadian banking is very connected to
        U. S. banking, it is separate and provides quick
        transfer of money to be either invested or
        further transferred.

        Maybe you should invest some of your bitcoins
        in Canada?

        There are several large Ukrainian communities, such
        as in Alberta and Toronto. Where is your Canadian
        commentator to inject an invitation?

        Maybe you could study some Ukrainian history not
        blurred by the Soviet influences in Alberta? There
        used to be a Ukrainian community that consisted of
        those who escaped Ukraine before the Soviets.

        Many were from Eastern Ukraine before it was
        annihilated with the Communist Holodomor.

        Consider that you might just get a different slant on
        Ukrainian history?

        Just a few days to explore the other Ukraine?

        ————- // ——————

        Addendum:

        Hitler’s Hero

        “Once upon a time, before Hitler, Stalin,
        FDR, Juan Peron, and even before Mussolini and
        Lenin came on the world scene, there lived a man
        named Dr. Karl Lueger (1844–1910), who was
        protector of the common man, a proponent of social
        justice, and the mayor of Vienna from 1897 to 1910.

        Reply

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