Last year the U.S. Treasury printed more $100 Bills than Dollars for the first time in history. There are now more than seven billion portraits of Benjamin Franklin in circulation. Talk about being popular! Evidently, $100 Bills are hoarded like gold in unstable areas because the Federal Reserve estimates that two-thirds are held by foreigners.
To meet the foreign demand, the Federal Reserve has licensed banks to operate currency distribution warehouses in London, Frankfurt, Singapore and other financial centers around the world. In March, the value of all American notes in circulation topped $1 Trillion for the first time, largely in part to the boom in $100 Notes.
And that is very profitable for the United States.
U.S. Currency is printed by the Treasury and then issued by the Federal Reserve. The Reserve pays the Treasury for the cost of production – about 10 cents a note – then exchanges the notes at face value for securities that pay interest. Thus, the more money it issues, the more interest is earned. As a result, the Federal Reserve returns what is called a seigniorage payment the U.S. Treasury. Last year that payment exceeded $20 Billion Dollars.
So, when it comes to Old Ben, business couldn’t be better. However, overall, the production of paper money is in decline. Particularly $1 and $5 Notes. Production of $5 Notes dropped to the lowest level in three decades, while the Dollar fell to a modern era low last year. Of course, their are two schools of thought on why, but one suggests that people are more inclined to “swipe their credit or debit cards” for routine purchases. Even taxi fares have seen a trend towards paying with plastic. And we mustn’t forget that there has been an increase in online shopping too.
But we mustn’t forget that the economy hasn’t exactly been all that hot either. In spite of what financial pundits would like everyone to believe, retailers are suffering as same store sales continue to decline. People have been forced to cut back for a variety of reasons and that trend does not appear to be letting up. Fuel costs, while declining slightly, are still higher than a year ago and people have opted to use their vacation time as “staycations.” I don’t know what the final numbers will be this year, but my guess is that the pundits will be revising their earlier forecasts of an economic recovery after they pull out the usual buying surges associated with certain holidays and/or back to school necessities. The bottom line is what it is – the U.S. Economy is still on a life support respirator.
As much as I want to believe the expert forecasts I suspect many people are resorting to charging it because it is a way to delay paying for essentials. I am sure we will see another spike in bankruptcies in the near future. Whether you believe in the official, or the unofficial, unemployment rate – either way it is still way too high! Those lucky enough to get hired are most likely earning less than they did and have some catching up to do on those “past dues.” Yes sir, cash is definitely on the decline alright, but I don’t think it is as simple to pin down as to what the real reason or motivation is. Be it cash, credit, debit or Android, sure, we pay for things in a variety of ways. But my guess is that cash will never grow old and will used well beyond our lifetimes. Let’s face it, it feels pretty darn good to slide some real money across a counter. After all, it means you have some.
But I sure am glad that Good Old Ben is so popular –
someone has to pay the bills.