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I found this interesting, money-related question in a recent issue of Parade magazine:
If all the money in the world were redistributed so that everyone had the same amount, what would it be?
My guess was somewhere in the $100,000 range. The real answer shows how stupid and misinformed I am when it comes to the global supply of money and the number of people on the planet. (Before you read on, do you want to guess the answer yourself?) Here's the correct amount:
The global money supply is about $60 trillion. (Economists call this figure the M3 value; it includes much more than currency.) Say that we take it all—which means that you and Bill Gates would have nothing in the bank—and then distribute it equally among every individual in the world, about 6.8 billion people. Each man, woman, and child would receive about $9000. So, if your household now has less than $9000 per person, you would gain. If you have more, you would lose.
A couple thoughts:
1. This doesn't include all "wealth", just all "money". For instance, this isn't dividing up physical items of value such as real estate, natural resources, etc. (for more on what's included in M3, check out this piece.)
2. $9,000 is not much at all. Yikes! There are certainly a huge number of people in this world that literally have nothing.
What was your guess? Were you closer than I was?
I was closer but not by a whole lot. Interesting exercize. Once you've been to a few of the places where people, as you say, have literally nothing that number ain't all that shocking.
Posted by: guinness416 | September 08, 2009 at 05:02 PM
Since price levels are much lower in many other parts of the world, $9000 in those places would have much greater purchasing power than it does here.
Posted by: Terry | September 08, 2009 at 05:13 PM
Interesting... your reaction is that $9000 is a very small number. Mine is that it's very large.
$9000 per person in cash-on-hand is quite a decent amount of money. It's not enough to retire on, but I reckon it's more than a lot of American families have in their savings accounts.
Also keep in mind, in a lot of parts of the world, it only takes $300 or so to be truly life-changing. Microloans of about that much often turn people's lives around. Having $9000 cash per person would lead to some significant changes in standard of living (short-term for some, long-term for others, depending on whether they blew their cash on consumables or used it to create wealth-creating businesses.)
Posted by: LotharBot | September 08, 2009 at 06:12 PM
The funny thing is, if we could accomplish this "equal global wealth redistribution", it probably wouldn't take too terribly long for the status quo to resume. We've all seen plenty of examples where those who don't know how to handle money lose any windfall (e.g. inheritance, lottery) rather quickly, and those who know how to manage money, how to make money, and who have the networks bounce right back.
Although it'd be worth it just to see Paris Hilton and every other spoiled, lazy, insolent brat brought back to basics for a while...
Posted by: Dar | September 08, 2009 at 06:15 PM
Right...since I think I can manage money but not make money, $9000 for me would be life-changing. With $9000, for example, I would be able to start money-making projects I can't start now.
Surely there others who would do a far better job with $9000 than I would, but you're right, most would probably blow it fairly quickly.
Posted by: Terry | September 08, 2009 at 06:22 PM
I'm with LotharBot-global middle class is just over 1000$ a year income, so you're talking about nearly a decade's work of wealth per person for most of the world. (1 billion people under 300$ per year, 2.4 billion under 1000$) http://ucatlas.ucsc.edu/income.php
In this little thought experiment, obviously the market for luxury goods would crater, but the inflation in demand for motorcycles and cinderblock would be amazing.
Dar,
most of the spoiled, lazy, insolent brats would be back to basics forever-its not like Paris Hilton has anything going for her other than inherited wealth.
It took centuries for global wealth to get organized the way that it is currently, and the conquest of most of Africa and North America by European powers was a key point in the distortions of wealth we have today. I suspect it would take more than a few years for networks to restart. I guess if we left all material wealth in its current hands that would be somewhat less true, but I think you underestimate how many people in India, China, and Africa that live on around 300$ a day know how to manage money really well and just have no opportunity for education and advancement.
Posted by: StL Pastor | September 08, 2009 at 06:37 PM
According to Wikipedia numbers, the world wealth in 2000 ($125 T) distributed to the world population (6 billion), results in average wealth of about $20,000.
Also, Wikipedia says 90% of this wealth is held by people in North America, Europe, and high-income Asian countries, and 1% of adults are estimated to hold 40% of world wealth, a number which falls to 32% when adjusted for purchasing power parity.
http://en.wikipedia.org/wiki/Wealth
Posted by: Andy | September 08, 2009 at 07:43 PM
And all these years I thought M0 was a descriptor of my financial position.
Posted by: Terry | September 08, 2009 at 09:31 PM
Great topic. Very similar to my topic "Do Higher Taxes Lead To Socialism In America?"
$100,000/person could be about right. Still not that much.
Posted by: Financial Samurai | September 09, 2009 at 02:10 AM
I agree that this stat is uninformative unless all wealth is considered. Most $$ is not just sitting in the bank--it's invested in factories, real estate, etc. The Wikipedia number cited by the poster above seems reasonable.
So I guess the next question is would it be a good thing if the world's money was all redistributed evenly? IMO, probably not (Paris Hilton notwithstanding!).
Instead of a little pile of cash for everyone, which most people would just spend on TVs or junk like that, I think it is much better that fewer huge piles of cash are invested in businesses and infrastructure that are capable of creating value, jobs, and building the economic structure into the future.
Because the amount of money in the world is not a fixed commodity like the amount gold, oil, etc--it can increase if treated right. There was much less money in the world in the 1600's than there is now.
Posted by: MC | September 09, 2009 at 06:23 AM
There is about 1 oz of gold for each person in the world, divided equally. This tells me that if we were to do away with our fiat money, gold would sell for $9,000 oz. It's currently less than $1,000. With all the legal counterfeiting the federal reserve is doing (printing press at full speed), its time to dump the dollar.
Posted by: Mike | September 09, 2009 at 07:52 AM
Mike-that's assuming everyone wants their fair share of gold. For most of the world's population, Gold comes well after food and housing in terms of desires. I'd be happy to sell you my share of gold for much less than 9,000$. It is essentially useless, after all. That lack of demand deflates the price of Gold. Anyway, your statement is nonsensical-fiat money means that gold is MORE expensive than it would be on a gold standard, not less expensive-fiat money is inflationary. If we were still on the gold standard, gold would cost less, not more than it does now.
Posted by: StL Pastor | September 09, 2009 at 11:47 AM
Part of the problem is that apparently most people don't understand what money actually is.
I highly recommend "The ascent of money" by niall ferguson.
This book is very well written and clearly describes the history of our monetary and financial system from ancient times (gold) up to the present day where money/financial assets include complicated debt instruments and venture capital.
As StL Pastor notes, money is worth only what we, as a society, think it's worth. It's a cultural concept, not something fixed like gold or diamonds.
Posted by: MC | September 09, 2009 at 01:16 PM
There is about 1/700 of a copy of Starcraft for each person in the world, divided equally. This tells me that if we were to do away with our fiat money, Starcraft would sell for $6.3 million dollars per copy. It's currently less than $20 on Amazon. It's time to dump the dollar and buy Starcraft!
Posted by: LotharBot | September 09, 2009 at 03:15 PM
LotharBot,
I stand in awe.
Well played.
Posted by: StL Pastor | September 10, 2009 at 06:22 PM
Thanks.
I just can't stand people advocating gold as some sort of magical, mythical perfect standard. Gold is subject to the same overvaluing/undervaluing/manipulation as stocks, bonds, or dollars (and right now, IMO, it's near a peak, and it's time to sell if you can.) It's useful in electronics and for jewelry, and not suitable for human consumption. When it comes down to it, gold is a fiat currency.
Posted by: LotharBot | September 11, 2009 at 02:11 AM
True wealth has nothing to do with money but access to the natural resources that ultimately control the creation and flow of money. I agree with Gold being overpriced dump it and the dollar, buy Silver, much wiser.
Posted by: J.C. | September 14, 2009 at 04:59 AM
Actually, your math is rather off.
(This scenario could never actually happen because there would have to be someone to buy, literally, every thing in the world. But assuming there were some outlandishly rich alien up to the task...) If everyone in the world sold everything they had at fair market value (to the outlandishly rich alien) right now and threw all the money in a big pile, there would be about 340 trillion dollars in that pile. The 60 trillion (and it's really closer to 70 trillion when corrected for purchasing power parity) you quoted is the world's gross domestic product, which is the amount of money the world produces every year. However, 80% of the world's money sits in ownership of some real asset, derivative, or some other financial instrument which, for the most part, means a share in some large corporation. This money doesn't actually DO anything (pay salaries, create jobs, etc.); it's the mark of ownership. It's what it costs to be a part of the class of people who can live off the interest of money they have just lying around.
So, actually, when you divide $340 trillion by 6.8 billion people, the number comes out to about $50,000 for every man, woman, and child on Earth. This neglects, however, a fundamental principle of redistribution: psychology. If everyone had the same amount of money, money would be worth nothing. What that should tell us is that economic inequality isn't based on having or not having money but on devaluing others for our own gain, which is why 80% of the world's value lies around while the rest of us work our butts off for the other 20%.
Posted by: Tyler Clark | September 14, 2009 at 10:57 AM
I think all the above comments do not take into account real resources....land...gold...silve...copper..diamonds....art...buildings....the nuts and bolts in a hardware store..etc. What I'm talking about is stored wealth and any thing of value. It seems to me, if all these were divided equally..that is...If I have equal share of IBM..and equal share of the Panamal Canal..my share of all the oil reservers....etc...etc..we would all be millioniars...every person in the world.
Posted by: rick | October 21, 2009 at 02:19 AM
Any asset of monetary value requires cash to be bought. As this scenario ostensibly accounts for 'all the money in the world', then I would argue that the value of any saleable assets is not relavent. To dispose of the asset and realise its value would be to simply redistribute a portion of 'all the money in the world'.
Posted by: Martin | March 19, 2010 at 02:53 PM
I would further argue that current purchasing power variances between different parts of the world would be irrelavent if money was distributed equally.
The purchasing power of money relates heavily to average income values and that is why goods are far cheaper to buy in some countries when compared to wealthier ones. If everyone had the same amount of money to spend then I think that, where necessary, goods and services would be revalued accordingly.
Posted by: Martin | March 19, 2010 at 03:03 PM
So you say $9,000.00 could change your life??? If you live in the US and take on a part time job making minimum wage and save every check. In a year and a half you will have your money and can change your life! the problem in this country is that only 1 percent know how to save money. the rest just blow on interest payments.
Posted by: Wendell | November 21, 2011 at 11:29 AM