Puzzle "Hidden Money": Why do banknotes in your pocket only represent 8% of the world's wealth?

Did you know that the vast majority of what you call "money" is just numbers moving within banking systems? The paper and coin money we touch accounts for only 3% to 8% of the total economy.

Here is a simplified guide to understanding "Money Supply" and how central banks categorize levels of money:

What is the (Money Supply)?

It is an indicator that measures the amount of money available in the economy in various forms. It’s not just "cash," but the engine used by the central bank to:

- Determine inflation trends.
- Predict recessions.
- Make interest rate decisions.

Levels of Cash: From "Cash" to "Heavy Assets"

Economists have developed 5 levels to measure money based on how quickly it transforms into purchasing power:
1. M0: The simplest form of money

What is it? Physical cash and coins in circulation + reserves in bank vaults.

Feature: The most liquid of all, but the smallest part of the total supply.
2. M1: Money ready for immediate spending

What is it? M0 + checking accounts (accounts you can withdraw from with your bank card).
Importance: Measures the immediate purchasing power for daily consumption.
3. M2: Growth and inflation driver

What is it? M1 + savings deposits and short-term deposits (less than a year).
Importance: The most important indicator monitored by governments to understand inflation and local growth trends.
4. M3: Funds of major institutions

What is it? M2 + long-term deposits and financial instruments of large institutions and corporations.
Importance: An indicator of the financial system’s capacity to support national projects and large-scale financing.
5. M4: The complete picture of liquidity

What is it? The broadest measure; includes certificates of deposit and quasi-cash assets.

Importance: Used to understand total liquidity during major crises.

Summary:

The higher the "level," the less liquid (harder to spend money immediately). Understanding these classifications is what differentiates a "thriving" economy from one drowning in "inflation" due to pumping money without real production.

After knowing these classifications, do you think that the disappearance of "cash" (M0) and our total reliance on digital numbers will benefit the economy or increase the risks of crises?