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Weekend: STARTERS: Weekend: Ask a grown-up: HOW MUCH MONEY IS THERE IN THE WORLD? (MY GUESS IS pounds 4,005,765) DELILAH, 8

August 30, 2014

Guy Fraser-Sampson



Guy Fraser-Sampson, financial analyst and author of No Fear Finance, replies: Grown-ups cannot agree on what "money" really is. Originally people used precious commodities such as gold and silver as money, and each coin was worth the value of the metal it contained. Some people still believe that gold is the only real money, and that paper money is a sort of pretend money, called fiat money.

But even this is not correct. A prime minister called Margaret Thatcher tried to control the amount of money in circulation, but failed because her advisers hadn't realised that banks can create new money just by lending it to their customers. This is called account money, and is electronic data on computer systems.

According to the Bank of England, all this comes to about pounds 1.7tn - and that's just for the UK, or pounds 30,000 for every person in the country. The more money banks produce, the less value it has. Personally, I'd prefer to have lots of gold.

If you're 10 or under, and have a question that needs answering, email ask.a.grownup@theguardian.com, and we'll ask an expert for you.



For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Guardian (UK)


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