Determining the World's Most Common Currency

Currency that is popular may not be the most common, and the most common unit of currency may not be a paper bill. The reason for this is our traditional conception of money is most commonly embedded in the reality of physical money. In reality, physical money comprises only a fraction of actual money available in financial markets and institutions. In other words, money is paper and electronic, levered and collateralized, issued and recalled.

The following analysis will take several metrics of international cash-flow, and then weigh and compare them to gain a more thorough assessment of which monetary unit is indeed the most common.

Purchasing Power Parity of Gross Domestic Product:

If a country were to convert all its products and services into a net sum with equivalent value worldwide one would have the purchasing power parity of a country's gross domestic product. This purchasing power as collateralized by GDP was $13.74 trillion in 2006 for the European Union according to the CIA world fact book. (https://www.cia.gov) The United States had a 2006 figure of $13.16 trillion.

Highest volume of Physical Money:

According to http://www.marketoracle.co.uk, the European Union has the highest volume of physical currency in circulation worldwide followed by the United States and Japan. The values of circulating currency assessed by the aforementioned organizations is over $800 billion for the Euro-Zone, over $750 Billion for the United States, and $600 billion for Japan.

Highest volume of Total Currency:

Total currency can be thought of as the physical amount of money in circulation in addition to other forms of currency such as electronic money in savings accounts, government loans, monetary funds and other financial instruments. The website, http://www.marketoracle.co.uk reports the United States to have the highest amount of total money available worldwide at $12 Trillion, followed by the Euro-Zone at over $11 trillion and Japan at $10 Trillion.

Alternative Currency:

At points in history, Gold was considered to be a more stable form of exchange than is paper and electronic currency. For example, it was only relatively recently in the 1970's that the United States stopped collateralizing the U.S. Dollar with Gold. Since the 1960's, Western Europe has held the largest amount of Gold in reserve according to the World Gold Council (http://www.gold.org)

Foreign Exchange Volume:

The foreign exchange market (FOREX) is one of the world's most active financial exchanges. In this exchange, massive amounts of electronic money, in various currencies, are traded weekly. This money is often leveraged to proportions well beyond the actual amount of collateral money investors have in their accounts. The currencies most traded in the foreign exchange are the United States Dollar and the Euro. If the foreign exchange statistics are any indicator of common currency, the Euro and Dollar are the most common by this metric.

Thus we can see, there are many ways of measuring money not limited to the above methods. One can even consider the total amount of pennies or smallest denomination of European currency a monetary unit and total those up. For the purposes of this article however, money includes value of goods and services, physical money, total money, alternative currency and currency exchanged. Based on the information in this article, the Euro is the most common currency, closely followed by the United States Dollar.