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I've come up with this question while discussing the topic of customer-perceived value with coworker.

Is there a theoretical upper limit to all circulating money in this world?

To avoid inflation or the simple answer "just print more money", let's use the current USD as the 'standard money' in this question. (I'm simply going to go off 'value of USD' from Google [if someone has a more precise way, then any suggestions would be much appreciated] where 1USD = .91 euro at the time of writing this).

According to Business Insider:

according to the CIA, the total amount is $80 trillion if you include "broad money.

In my mind, assuming that all first-world counties' standard of living stay the same or get better, if third-world countries were to, all of a sudden, become first world countries in 2020, that would mean there is more money circulating in the world (more GDP per capita in the third-world country, thus more GDP per capita in the world).

And as the economies of third-world countries get better, they would create more value in their products/services that the people of their country produces.

So in an ideal world, if everyone lived as millionaires (aka, everyone drives $100,000+ cars, million-dollar homes etc.), due to the economy in every country flourishing, wouldn't that mean there is no upper limit to all circulating money in the world?


But as a counter, that's only in an ideal world - not reality.

Let's say you can buy a car for 50,000 USD. The manufacturer is not going to create that car if it takes them $50,000 to make it. Where's the profit?

So then let's say there is a company that creates the rubber for the tire, another company creates the seats for the the car, so on and so forth. All those companies are not going to create their product without profit, because where's the incentive to do so without it?

If that's true, then someone at the bottom of the chain will be doing the work for minimal profit, which makes me think that the cars that are sold to people only exist because people at the bottom of the chain - which leads to, first world countries only exist due to third world countries (why do you think a t-shirt at GAP costs 3 dollars? Gap is selling you the shirt for 3 dollars because they only paid 1.50 dollars to make it, which someone did, most likely in a third world country), which means the upper limit of circulating money in the world would more or less look like y = ln(x) image of y = ln(x) because as first-world countries get wealtier, there is only so much they can grow because they're bounded to the work in third-world countries.

Disclaimer: My counter argument is simply a hypothesis and I have no grounds of proof. I'd be happy to debate/have someone shed some light if I am entirely wrong. The only reason why I mentioned it is because I wanted to provide a counter reason as to why there is an upper limit to all the circulating money in the world.

Clarification: What I am not asking is all the value in the world. I could create a painting and say it's worth 900 trillion dollars and that would 'increase' all the monetary value in the world to 980 trillion (assuming that we currently have $80 trillion in circulation). What I am asking is strictly circulating money.

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What you are asking, dressed up in economics lingo, is as follows:

Is there a limit to real gross world product growth?

Short answer

A qualified no.

Longer answer

First of all, developed countries do indeed heavily benefit from the work of developing countries. Globalization has found a way to incorporate cheap labor from overseas for economic growth. However, incorporation of more labor is not the only way the economy grows. Innovation such as new ways to manufacture things more efficiently is another. Just search for "ways in which GDP grows" and most results should apply. But the bottom line is one could imagine a situation were autonomous robots produced expensive cars that were freely available to everyone without having to exploit human labor. Of course, whether the environment could sustain such intense resource usage or whether humans can bring automation/AI to such a point may put practical limits.

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  • $\begingroup$ Is something really expensive if everything is expensive? I guess this is getting philosophical as we dip into 'is something really premium if everything is premium?' Doesn't that defeat the purpose of premium? Price on products is determined by customer-perceived value, which would not be high if every car was premium. Compare modern cars with cars from 80 years ago. Today's Honda runs home-runs around 80 years ago Rolls Royce (a/c, engine, etc.). Better average cars in my opinion don't increase GDP per capita. It's the combined increase of standard of life across the world that does. $\endgroup$ – Jedo Sep 6 at 20:15
  • $\begingroup$ What you are describing is known as a position good: see en.wikipedia.org/wiki/Positional_good . $\endgroup$ – Kent Shikama Sep 6 at 20:15
  • $\begingroup$ And I'm not sure if everything will necessarily be free even with complete autonomous machines. Maintenance, efficiency, minerals (once we run out of oil in one location, where we should pump out in the next location) - all require man-power (granted, a lot less than now) - so while I'd agree with you that prices would decrease, I don't know about "free". Consider if everyone drove Roll Royces - would that still make each Rolls Royce worth $300,000 (or however much they're worth)? Personally, I would think not - feel free to prove me wrong :) $\endgroup$ – Jedo Sep 6 at 20:17
  • $\begingroup$ Increase in GDP per capita is not necessarily correlated with increase in standard of life, and vice versa. I agree that we need to reduce positional externalities (externalities that result from positional goods). I think you're confusing real GDP growth with the recent increase in positional goods due to wealth inequality. $\endgroup$ – Kent Shikama Sep 6 at 20:35

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