Despite new technologies for electronic payments, cash has never been so popular. According to the Federal Reserve Bank of Richmond , during the last decade, dollars in circulation as a percentage of GDP have almost doubled from 5% to 9%. Today there are $ 1.6 trillion dollars in cash in circulation, or approximately $ 4,800 for each person in the United States.
In addition to being used as currency, cash also acts as a store of value. Tim Sablik , writer at the Federal Reserve Bank of Richmond and author of the article Is Cash Still King? believes that "high denomination notes are the most appropriate for this purpose, so tracking their circulation can give an idea of how important this aspect of cash is to explain the demand for foreign currency. Large denomination notes seem to be driving cash growth, with the $ 100 bill accounting for most of the total value of the currency in circulation. "
Demand for $ 100 bills has significantly outperformed other denominations in terms of pure volume, averaging an annual growth rate of almost 8% since 1995 compared to 3 to 4% for most other notes. In fact, in 2017, the 100 ticket exceeded the 1 dollar bill as the most widely disseminated note in the US. UU ..
While part of this demand may come from domestic savers, Fed researchers believe that a large part of the $ 100 bills travel abroad. Ruth Judson , economist of the Board of Governors of the Fed, mentions: "We believe that the importance of external demand is unique to the dollar, other currencies are also used outside of their countries of origin, but as far as we know, the dollar has most of the notes outside the country. " She has estimated that up to 70% of US dollars are kept out of the country. In addition, Judson estimated that up to 60% of all "Benjamins" are in the hands of foreigners.
"The demand for dollars abroad is probably due to their status as a safe asset," says Judson. "The demand for cash, especially from other countries, increases in times of political and financial crisis, while Treasury bonds and dollars continue to be assets of refuge in times of global crisis, such as the 2007-2008 financial crisis." Judson found that while international demand for dollars began to decline in 2002 after the introduction of the euro, that trend reversed after the 2007-2008 crisis.
As Sablik affirms, crises encourage households to also seek the security of currencies and, with low inflation around the world, making the cost of keeping cash relatively low, more and more people, both inside and outside The United States is resorting to high denomination dollars to maintain part of its wealth.As Sablik affirms, crises encourage households to also seek the security of currencies and, with low inflation around the world, making the cost of keeping cash relatively low, more and more people, both inside and outside The United States is resorting to high denomination dollars to maintain part of its wealth.
SUBMITTED BY Gabriela Huerta