U.S. currency issues

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

The following is from an Associated press story that was linked from the y2ktoday website on 3/17. The story is no longer accessible. See also a related thread on this forum from 3/11.

Hoenig said the Federal Reserve now has about $500 billion in currency in circulation -- most of it outside of the United States.

About $150 billion of that is now in circulation in the United States, and another $150 billion is being held in the 12 Federal Reserve vaults and branches. The agency is now working with the Bureau of Printing and Engraving to add an additional $50 billion to its inventory by year's end.

The following US currency calculations are based on the above quote. They assume the current amount of currency outside of the US does not change this year:

Currency ($Billions) in circulation 500 Currency in Fed. Reserve vaults 150 Currency to be added in 1999 50 Total currency in existence as of 12/31/99 700 In-circulation breakdown Located outside of US 350 Located in US 150 US inventory as of 12/31/99 350 Rest of world inventory as of 12/31/99 350

US population as of 12/31/99 (est) 275,000,000 Available currency per person $1,273 Rest of world population as of 12/31/99 (est) 5,750,000,000 Available currency per person $61

Issues to ponder...

> What is the denomination breakdown of the currency in Federal reserve bank vaults?

> What is the denomination breakdown of the currency being printed this year?

> Read somewhere that most $100 bills are not in US.

> Will 12/31/99 US currency inventory be less than current dollar value of gold and silver in US?

> 12/31/99 US currency inventory in the rest of the world will be much less than current dollar value of gold and silver there.

> Seems likely that entities in countries with poor post-Y2K outlook would increase holdings of US currency later this year, especially if the US markets start to decline.

> If rest of world doubled their current US currency holdings, none would be left for the US.

> Is there a practical way for the US to restrict the flow of currency from the US?

> Where are the concentrations of US currency outside of the US?

> Non-US entities holding large quantities of US currency could become more powerful in their own countries.

> If worldwide shortage of US currency develops, what other countries' currencies would become more desireable?

> In the US, discounts for cash may increase and become more widespread.

> What is the total amount of US-dollar-denominated accounts (checking/ savings/ CD/ etc)?

> What is the total amount of US-dollar-denominated securities (NYSE/ NASDAQ/ etc)?


-- Mr. & Mrs. Jones (joneses@jworld.wrl), March 22, 1999


Federal Reserve Notes (FRNs) are said to be denominated in dollars. That is a widely accepted fiction, since a "dollar" is a Constitutionally defined unit of measure of gold or silver just as a gallon is a unit of measure of water, milk etc. FRNs have no gold or silver backing (or any other kind of backing) whatsoever. They are instruments of debt, not measures of assets. FRNs are fiat money- that is, they have value only because existing legal structure says so. Approximately 2/3 of the existing FRNs are held overseas (don't know what countries have more- can't see that it matters much). There are about $1.70 or so available in real currency/change for every $100 that "exists" digitally. The "extra" $50 billion will take that up to just over $2.00 per $100. Point: there is not enough cash to go around if a good number of people decide they want cash. Thus official fears of "panic."

As to relative values of currency vs. gold/silver and the relative worth of various paper instruments and currency, I don't know and I think it's somewhat too fine a point to be concerned about now ("academic" is the word, I think). You should have bought gold and silver in the fall of last year if that is part of your plan- the premiums are up considerably on coins though the "official" price of bullion is still relatively low in the historical sense. You should have or be establishing a cash reserve in small bills sufficient to meet your defined needs for the period of time you dedide is reasonable.

You should keep in mind that the US is now the world's largest debtor nation, is a shrinking island of prosperity in a sea of financial disasters, and has been through the 'central banking/ fiat money' experiment four times before now with unhappy results each time (see Andrew Gause's writings on the history of money). You should remember that bears are bigger and badder than bugs no matter how hard the bug bites. You should plan your affairs accordingly. You live in interesting times.

-- (li'ldog@ontheporch.com), March 22, 1999.

Inflation is any medium of exchange that the first user gets for nothing and the last user gets absolutely nothing for it.

For those interested I have a video tape where Monetary Realist Merrill Jenkins Sr. debates a Fed Economist. Jenkins blows him out of the water. Contact me!!

-- Ernie S. (edsexcel@ameritec.net), March 22, 1999.

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