John C. Williams president of the Federal Reserve Bank of San Francisco in essay titled, "
Cash Is Dead! Long Live Cash! reports"
[S]ince the start of the recession in December 2007 and throughout the recovery, the value of U. S. currency in circulation has risen dramatically. It is now fully 42% higher than it was five years ago. ... Over the past five years, cash holdings increasedon average about 7¼% annually, more than three times faster than theeconomy’s growth rate over this period. At the end of 2012, currency in circulation stood at over $1.1 trillion, representing a staggering $3,500 for every man, woman, and child in the nation[...]
What caused the jump in cash. Williams fills us in.
As fears about the safety of the banking system spread in late 2008, many people became terrified of losing their savings. Instead, they put their trust in cold, hard cash. Not surprisingly, as depositors socked away money to protect themselves against a financial collapse, they often sought $100 bills. Such a large denomination is easier to conceal or store in bulk than smaller bills. Indeed, in the six months following the fall of the investment bank Lehman Brothers in 2008, holdings of $100 bills soared by $58 billion, a 10% jump[...]As Europe’s crisis worsened in the spring of2010, U.S. currency holdings rose sharply. And they continued to rise as economic and political turmoil and uncertainty about the future sent Europeans scrambling to convert some of their euros to dollars. It’s estimated that the share of U.S. currency held abroad rose from about 56% before the tumultuous events of the past five years to 64% in 2011
As fears about the safety of the payday lender banking system spread in late 2008, many people became terrified of losing their savings. Instead, they put their trust in cold, hard cash.
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