The Composition of U.S. Currency

The Composition of U.S. Currency
January 16, 2010

“Money” is really what is technically known as “base money.” “Base money,” in turn, is mostly — typically about 90% — banknotes and coins. So let’s take a look.

Here we see that there was a total of \$1,176 billion of banknotes and coin in existence. Most of this — \$1,133 billion — was “Federal Reserve Notes,” your usual dollar bills and so forth. There was another \$43 billion of coins. The Treasury hed \$261 million, probably in a warehouse. Federal Reserve Banks had another \$222 billion, also in a warehouse. Banks can go to the Fed and trade their bank reserves for paper banknotes on demand. If you go to a bank and say “I want \$2000 in twenties please,” and there are a lot of other people like you, and the bank needs more twenty dollar bills, this is how they obtain them. These banknotes held by the Treasury and Fed are not considered “in circulation.” They are held in storage in case there is a sudden demand for more paper money.

Here we see that there were \$9.4 billion of \$1 bills, \$16 billion of \$10 bills, \$126 billion of \$20 bills, and \$685 billion of \$100 bills. Indeed, of the \$914 billion of Federal Reserve Notes in circulation, 75% is in the form of \$100 bills. The total circulation of all of the banknotes of \$10 and less amounts to \$37.8 billion, or only 4.1% of the total.

This should make you think a bit. When was the last time you even saw a \$100 bill? I don’t think I saw one last year. Most people use \$20s, and a credit card or check for larger amounts. Where are all these \$100 bills? What are they used for? They must be useful for something, or all the people who have those \$100 bills would trade them in for some sort of interest-bearing note (maybe not so much today since interest rates are low). For example, they could deposit them at a bank. The bank, if they had more \$100 notes than they needed, would then give them to the Fed in exchange for electronic bank reserves (in effect a deposit at the Fed).

Next, we see that there are \$3,074 of notes and coins in circulation for each person in the United States. Look in your wallet. Do you see \$3,074 there? If you have a family, multiply each person by \$3,074. Does your family of four have \$12,296 of banknotes in their wallet, sock drawer, safety deposit box etc.? Probably not, I’d say. This also includes banknotes held by businesses, in the cash register and so forth. But, that is not really all that much either. Businesses don’t like to hold a lot of cash, because it can be stolen. I remember not too long ago that I couldn’t get change for a \$20 bill at an Au Bon Pain in Boston.