@ Matthew Mezinskis

**Bit late this quarter, but here now for the latest release on the most irreducible form of money, the monetary base. Data comes from the top 50 currencies in the world, their countries of which represent 96% of global GDP and 84% of global population (not very fair, right there). Gold and silver is analogous to this money supply. As is the stock of bitcoins.** **This is quarterly release #26, for 2024 Q3.** If you have followed [my work](https://www.porkopolis.io/) before, then you know that the constant hymn I've sung while speaking publicly about Bitcoin is that the only, economically comparable money supply in the fiat world to 21 million bitcoins is what economists call the "monetary base," or "base money." This is a corporeal money supply that has existed across all of modern economic and central banking epochs. For an apples-to-apples, ontological comparison with Bitcoin, look no further then Base money. ## **So what is it?** It is *central bank money*, comprised of two supplies: 1. **Physical currency**: Notes and coins, or “cash;” 2. **Bank reserves**: The “Master account” that each commercial bank holds with its central bank. Now, why do I refer to this as, "Central bank money?" This is because, unlike all other money supplies in the fiduciary banking world (like M1/M2/M3), the Monetary base is the sole and ultimate money supply controlled by the central bank. It is, literally, the *printing press*. What follows won't be a lesson in reserve ratios or monetary economics. The point is that you simply understand that ***there is*** a money supply that central banks solely control, and of course (of course!) this is what Bitcoin's 21 million are up against. The monetary base is to the core of the entire fiat financial system, as 21 million bitcoins are to the core of the Bitcoin protocol. One is open and permissionless, and one is not. By the way, the monetary base is essentially (though not entirely) analogous to the *total liabilities* of a central bank, so we can (basically) say that the monetary base is the "balance sheet" of each central bank. **On cash**. Quick notes on the above. Certainly you understand what "cash" is, and it is indeed an instrument that has been fully monopolized by each central bank in each nation around the world--only they can print it. Even though it is true that banks in more free banking societies in the past could freely print and strike notes and coins, the central bank (or state) monopoly has been around for a long time. Kublai Khan was the first to do it 750 years ago. **On bank reserves**. Don't stress your brain on this too much, but this is the main "settlement money" that banks use between each other, when they want to settle their debts. It is digital now (Fedwire in US, CHAPS in UK), but it doesn't technically have to be, and of course before modern technology took over even a few decades ago, it was not. These two stacks of retail and wholesale cash, stacks of *central bank money*, are what makes up the **Monetary base**. This is the *printing press*. Only this compares to 21 million bitcoins. And gold, and silver by the way. Final note, central bank digital currencies, or CBDCs, which are simply LARPing on Bitcoin's success, are indeed created by central banks, and they are indeed classified as Base money. They are going to be a "third rail." They are thankfully incredibly small, pilot projects today. We will see how far democracies will be tested, as autocracies no doubt will mainstream them; but for now, consider them, at least economically, to be inconsequential to the update below. With that review out of the way, onward to Q2 update for 2024. ## **Bitcoin is the 6th largest money in the world.** In February 2024, it surpassed the monetary base of the United Kingdom, that is its value was larger than the Bank of England's balance sheet, and it remains so to this day. As of 30 September 2024, it is only the balance sheets of the big four central banks that are larger than Bitcoin. They are: 1. **Federal Reserve (dollar)**: $5.59 trillion 2. **People's Bank of China (yuan)**: $5.40 trillion equivalent 3. **European Central Bank (euro)**: $5.28 trillion equivalent 4. **Bank of Japan (yen)**: $4.69 trillion equivalent If we remove gold from the equation (we shouldn't), then Bitcoin could be considered the 5th largest money in the world. However, the all-important monetary metal throughout history that even a child knows about--gold--is still king at around **$16.5 trillion in value**, or 6.1 billion ounces worldwide. Note, this does not include gold lost/recycled through industry; in that case, it is estimated that about 6.9 billion ounces of gold have been mined throughout humanity. <img src="https://blossom.primal.net/b40e5acfc73a0fd4f34758da504dfe8a396c0b37cc491e28b8fac631de265115.png"> *Update #26 Executive Summary* Silver, for what it's worth, is still a big "monetary" metal; though it is true, much more silver is gobbled up in industry compared to gold. There are about 31 billion ounces of non-industrial silver floating around the world (most of it in jewelry and silverware form) that is valued in today's prices at nearly $1 trillion. Bitcoin bigger. ## **State of the Print: $27.0 trillion.** If we add up the Big Four central banks already mentioned above (again, Bitcoin being larger than the Bank of England's monetary base), as well as the next 46 central banks, we get to a total, USD equivalent value of **$27.0 trillion in base money across the world**. I**f we consider $27.0 trillion as the Big Boss of central bank money, then Bitcoin at $1.25 trillion network value (September, quarter-end figure!) indeed has some way to go.**  But as we can see from the last month leading up to this publishing, that can change quickly. We have just surpassed $100 thousand per bitcoin, which **brings the network value to $2 trillion**. We can also imagine how the Pareto distribution occurs even in money, if Bitcoin after only 15 years is already larger than every central bank money in the world except for four of them. Wild to ponder. ## **Supply inflation: 12.7% per year.** It is also true that for two years they have been trying to "normalize" their balance sheets after the 2020-22 Covid madness, stimulus, and money printing. Of course, they have been trying all along to normalize since the 2008 global finance crisis (GFC), but I digress. When I first started my website, I vowed never to use such a non-corporeal thing as CPI to discuss how much things cost. A "general increase in the level of consumer prices," or CPI, as measured by planning boards around the world, is not a real thing. It may be calculated by people with the best of intentions, but it has been manipulated and volumes have been written about it. I don't use it. I have always defined inflation as the classical economists did: Inflation is an increase in the "stock" of money. If we know the all-time stock of euros printed by the European Central Bank now, and we know the all-time stock of euros printed by the ECB 12 months ago, then it is very easy to calculate the annual inflation of the euro. Not only is it easy, but *it is real*. It is corporeal. **Watch what they do**, not what they say. I have been tracking this since 2018, and though this figure has evolved slightly (mostly increasing from massive COVID stimulus of 2020-2021, the high-signal, important to remember figure of all-time compound annual growth (CAGR) of the global base money supply since 1969 is 12.7%. That is **12.7% compounded, per year**. It is a doubling time of **5.8 years**. <img src="https://blossom.primal.net/caffef58bab6d1bd10e6a9ed6c716ac91de23fa990264749586641918482b723.png"> ***Growth rate of the monetary base*** It is highly valuable to understand that, *ceteris paribus*, if the demand for cash balances does not keep up with this monetary supply increase, then prices will rise. This erodes purchasing power. I do not attempt to measure the demand for cash balances in this research. Regardless, 12.7% is a useful figure to understand. ## **Let's compare.** For the rest of this report, I want to do something different and simply spend some time looking at the compound annual growth rates of various corporeal things around the world, in order that we can compare those to the growth of the fiat monetary base, and Bitcoin. Remember, most things in the financial and economic world grow exponentially. This simply means that they grow *constantly*. The financial term here is compound growth, or compound interest. This rate of growth can indeed change year to year (interest rates can go up, or down), but over the years we can observe a strong trend, and that is what I want to summarize here for you. ## **Population.** The world has grown exponentially at **1.7% per year** over the last 75 years. However, despite all the overpopulation myths you've probably heard, this rate of growth is actually falling, well below trend, and we only grow at **0.9% per year** at the moment. <img src="https://blossom.primal.net/b001bcc8ac726b7cb934ce8abd71e84c5e60f9253d5fa18c8db8021c66b45851.png"> ## **GDP.** The United States has grown its economy at 5.2% compounded per year since the founding of the republic. We are at the higher end of this trend right now, $28.8 trillion output per year, growing at **5.3% per year**. As this is exponential growth, if I put it on log scale, it will become a straight line. <img src="https://blossom.primal.net/2c9bb437e5403b16f7bdd628c8e8dd90b285b7ca5a20b731e1a9776d687c4578.png"> ## **Stocks.** Stocks grow exponentially as well, don't let anyone tell you otherwise. The growth rate is **7.3% per year** for the S&P 500, the main US index that tracks more than 80% of total market caps. Showing this one on linear scale on the left-hand axis, just so you can see how it typically scales. <img src="https://blossom.primal.net/dcc2a758310e1e8c01f2df309a93b327376099376c4ef39ebce12a0e7d3834f6.png"> ## **Stocks. With Dividends.** *If you reinvest those dividends* into the same stock market, you'll earn more. The all-time compound annual growth increases by 2% higher to **9.3% per year** for the S&P. Also displaying this one on linear scale. <img src="https://blossom.primal.net/a9c31d98de035ad78c4de49b04dd097cd4e9981abcfa3380ffc2a3ee8fcd2795.png"> ## **Bonds.** Bonds are supposedly safer than stocks (bondholders get paid back first), and more cash flowing. If you look at the longest running bond index in the US, it grows at **7.1% per year**, compounded. Notice how, in a rising interest rate environment (which we are at the moment), bonds will suffer, if viewing the price (or index, as in this case, using the Bloomberg Aggregate Bond Index). This has kept the bond market returns at the lower end of the range, since the global financial crisis in 2008. <img src="https://blossom.primal.net/0d789e45f3e1b6a76fb22e7e04c5b916d9bded98f3e5263492322ba3c5e32746.png"> ## **Base Money.** As we've discussed, base money grows across the world at a weighted average of **12.7% compounded per year**. However, this trendline analysis looks at it differently than my headline figure. It simply looks at the USD value of the global monetary base (again, **$27.0 trillion**), and draws an exponential trendline on that USD equivalent growth for 50+ years. In other words, this is going to be *after all currency fluctuations* have played themselves out. Do you think the growth rate here will be higher or lower? Actually, it is lower, at **10.3% per year**. But there is a big asterisk here, in that the series is not consistent across time. I typically just display it for visual effect. As more and more central bank balance sheets were added to this analysis across the 1970s and 1980s, it is not technically rigorous to run an exponential trendline analysis across these totals. **Better to use my headline figure of 12.7% CAGR.** Again, the 12.7% figure is rigorously calculated, measuring the native growth rate of each monetary base across every month recorded, then weighting that across every other monetary base in that monthly basket, then averaging all months for an all-time figure, and then raising that all-time monthly weighted average to the power of 12. What is interesting, however, is that the 10.3% derived CAGR using the exponential regression below is *lower* than my native headline figure of 12.7% . Remember, the 10.3% exponential regression **does not** account for all the new money supplies coming in during the 1970s and 1980s (which should push the regression slope higher as new supplies are added), *and* it is after all currency fluctuations have been factored in, to arrive at a USD equivalent. The lower 10.3% CAGR can only mean that central bank balance sheets actually lose value against the US-dollar *faster* than they can print! <img src="https://blossom.primal.net/f3c9f9af2e6cd59a5cea41cf4783a011099829906bcedf51afca8c2561e7c046.png"> Note, I am showing this one in linear scale. The trendline projects out to **$83 trillion** by December 2033. The current global supply of base money ($27 trillion) is about $6.5 trillion less than the current trendline ($33.5 trillion). ## **Silver.** This is total ounces ever mined. They trend upward at **1.4% per year**. <img src="https://blossom.primal.net/3abd3b80c57dd9e8d2075497a2861bcf39addc1d679ababb60510939eb169bf9.png"> ## **Gold.** This is total ounces ever mined. Gold trends upward at **1.7% per year**. Faster than silver. Surprised? Notice the R-squared (goodness of fit) for both silver and gold production increase. <img src="https://blossom.primal.net/f7728966e2ecea37749acd5787157244fa61001c16fa5b4a6dcf18f7e151ea40.png"> ## **Bitcoin.** Bitcoins grow according to a basic logarithmic curve. Trying to draw percentiles is pointless here, and even measuring a trendline is relatively pointless, as everyone knows the bitcoins prescribed into the future, per the protocol. Better to just quote the trailing 12-month growth figure, and it is **1.5% per year** and falling, as of quarter end Sep-2024. Less than gold. <img src="https://blossom.primal.net/d267873c029649fb5dda0446ed2eb3b96db34f47f43ec9ac4cf310e70013d81c.png"> ## **Silver price.** Since 1971 it's trended at 3.4% per year. Silver bug? <img src="https://blossom.primal.net/231bcd22be9d07a95ce2fa3c614d820910a9d2d744646b890d8e12b6b0cc633c.png"> ## **Gold price.** Since 1971 it's trended at 5.1% per year. Gold bug? <img src="https://blossom.primal.net/3aa240988a926928e1621d174b4a0108a32468e52f3058a19c0ec3db80fdc236.png"> ## **Bitcoin price.** Now, we have finally arrived at something that grows differently than exponential. [As I've observed since 2018](https://x.com/1basemoney/status/1079740420438011905), Bitcoin grows according to a power trend. Did you notice that the prior exponential trends displayed themselves as straight lines on log scale? Well, with Bitcoin, the power trendline gradually falls across time, but the growth is still well larger than anything we've covered thus far. Why? It's being adopted, of course. Bitcoin's power trendline has grown **167% per year** since Bitcoin Pizza Day in 2010. Note that this is something akin to a "Lifetime Achievement" figure, and it will continue to fall every day. Over the prior 12 months ending 30 September 2024, Bitcoin grew **134.6% over the year**. Well higher now at $100k. The compound growth of the power trend today is **44% per year**. By 2030 it will fall to "only" **36% per year**. <img src="https://blossom.primal.net/77fc9a8c58c0fb705ab574b24bd0777d2bb0c5a1a5668179c4242b311f656421.png"> Oh yes, and it is free (as in speech), open, and permissionless money. ## **To summarize.** That was a lot of data across a lot of charts. I've compiled it all in a helpful table here for you to review at any time. This is the monetary and major asset world at third quarter end, 2024: <img src="https://blossom.primal.net/e8c24f25504fe3fcdb4889101ffc51b0e0ca01039c41d06771aed9b4a4904fb6.png"> ## **Base money concluded** The following table gives you a complete summary of the fiat currencies, gold, silver, and Bitcoin figures used in this analysis, for this quarter. Please print it out if you like, it is meant to be a helpful, in-depth companion when fiat friends come asking. <img src="https://blossom.primal.net/cb7a6d04a0fbef82a68e67ac5b98cd2faeae31b39f68926e7a235d4e05020a3d.png"> Thank you for reading! If you enjoyed, please consider zapping, and you can also donate to my [BTCPay](https://donations.cryptovoices.com/) on [my website](https://www.porkopolis.io/) if you'd like to help keep this research going.