i’m just going through some basic financial philosophy discussions and i’m just trying to clarify the basics.
how much money is there in total, in the world?
up until yesterday i had assumed that the total amount of money in the world is zero ($0) because what one person has in bank account, another person has in debt at the same time, since money is literally nothing else than a codified form of debt.
now i’m wondering, is this even accurate? if a big bank takes out a loan from the central bank, say, it takes $1B in loan, then it has $1B in money on the account but also $1B in liability at the same time, so the sum is zero. However, there is an interest on the loan, let’s say 2%. Then the bank owes $1.02B actually, while only having $1B on the account. So the total amount isn’t zero, it’s negative. Is this correct?
Money is literally an “I owe you” note. It is issued by a central bank, and has no intrinsic value. The entire value of money is based on trust, that this “I owe You” note will good when you need to spend the value of whatever you did to earn the note.