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)

MOST VALUABLE M1 MONETARY SUPPLES

 
 
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

 
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

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.

There are four or five grocery stores on my street, within a single block of my apartment. I’m not sure why there’s such a concentration. Nevertheless, I walk about a quarter mile to a more modern one.

The modern one follows the American model. I look at products, hold them, study them, and them either put them in my basket or back on the shelf. I grew up with this model an never imagined another one could exist.

Perhaps that’s why it took me so long to realize that most Ukrainian groceries are following a different model, and even longer to realize that I hate it.

In most grocery stores, all produce lies behind the counter under the protection of the clerk. You have to communicate for every item. Studying an item and then rejecting it is taboo and will only be tolerated once or twice per visit. If you hesitate while studying products at a distance, the clerk might switch her attention to another customer. This is bad because in true Soviet fashion, NOTHING happens without the clerk.

Sometimes when there are no other customers, the clerk speaks on her cell phone. She’ll usually try to help me while carrying on her conversation, and poorly disguise her irritation when I interrupt with naive questions.

The moderately free market has brought choices to Ukraine’s grocery shoppers. I hope it comes to stationary stores too.

“What type of notebook do you want?” the clerk asked me. I was stunned and annoyed by the question. There seemed to be great variety on the shelves behind the lady and I wanted to browse leisurely.

How does this model of shopping allow for new products? for innovation? Does new merchansise gather dust on their shelves because no one every knew to ask for it?

I asked for a notebook that isn’t for children. Something without pictures. She scanned her shelves (something I would have gladly, preferrably even, done myself) and handed me a flimsy notebook (all Ukrainian notebooks are flimy) with only a small picture of a unicorn on it.

Somebody please open a Staples in Ukraine. I’ll be your best customer.

I’m thrilled.

http://www.12v.ua/

They’re an auto-parts store. :)