The Fed's weekly data release on March 4 showed seasonally adjusted currency outstanding at $468.5 billion. This is an increase of $1.5 billion from the previous week.

The currency growth rate seems (to me) to be significantly larger than in recent years, but is not currently anywhere near a rate that would deplete reserves by year end. I've read reports that reserves are about $150 billion with and additonal $50 to $70 billion to be reserved this year. Of course, current rates may not be predictive of future rates.

On a non-seasonally adjusted basis, currency outstanding fell by $200 million over the week ending February 22.

These figures are available at

http://www.federalreserve.gov/releases/H6/Current/

Table 4 for adjusted figures; Table 7 for non-adjusted. The Fed normally releases this data every Thursday afternoon around 4:30 pm ET.

-- Puddintame (dit@dot.com), March 06, 1999

Answers

Pudditane....what the hell does that mean? Put that into "anglish" for us hillbillies. If I am supposed to worry about this, I gotta unnnerstan it.

Got brains??

-- Taz (tassie@aol.com), March 06, 1999.

Taz, It's my theory that by monitoring the site I gave above, you can determine if the banks are (or are not) about to run out of cash. It is widely reported that the banking system has about $150 billion worth of paper money in reserve and available for withdrawal. Greenspan has stated that this "stash" (my word) will be increased by about $50 billion in anticipation of an increased demand for cash at year end.

So, even if the currency outstanding (according to Table 4) continues to increase at the relatively high rate of $1.5 billion dollars per week, through the end of the year, we won't come near depleting the $200 billion stash.

Of course, the most likely scenario would be that demand for actual dollar bills remains steady until the last week of December, and then there will be a sudden demand. These figures won't help you any there. But the figures in Table 4 might give you a little additional insight into the mental state of the herd.

It's my opinion that the current figures show that people are intentionally holding more dollar bills than they did last year, but nothing alarming at this time. I don't think that would be a surprise to anyone.

-- Puddintame (dit@dot.com), March 06, 1999.

Thanks...that helped. I am sure one of the holders and so are several family members and friends, so there has to be a lot of us. Just about anybody is smarter than we are.

Got lumpy mattresses??

-- Taz (tassie@aol.com), March 06, 1999.

Are there any figures/estimates that indicate how many dollars are outside of the country? A few weeks ago, Argentina was considering going to the US Dollar as their own currancy. This has to mean there is one hell of a lot of dollars around the world.

Bill in South Carolina

-- Bill Solorzano (notaclue@webtv.net), March 06, 1999.

Bill, the $468.5 billion figure is a total, worldwide. I believe there are only estimates of how much is here vs. overseas. I have seen those estimates recently, but frankly, cannot remember them. Nabi Davidson may have those figures.

-- Puddintame (dit@dot.com), March 06, 1999.

Puddintame,

We actually need to watch how much currency the actual banks have. Knowing the total currency float doesn't do much good. The fact that it is growing at a rate of 0.3% (three-tenths of 1 percent) is helpful. But how much of this even stays in the country?

The total float of ALL Fed currency ever issued and not retired, i.e., bundled up and burned due to wear and tear, is something like the number you quoted, around $470 billion. Of this, it is reported that two-thirds, or approximately $315 billion is not in the US and likely will remain outside the US. It is not even known how much of this overseas currency actually still exists.

That leaves the often-quoted $155 billion in the US. Of this, approximately $110 billion is already in circulation -- it is not in any bank's vault and the banks cannot lay claim to it, short of offering outrageous interest rates to attract deposits. That leaves the banks with approximately $45 billion is currency, which, interestingly, represents nearly all of their reserves as well.

Now, it has been reported that the Federal Reserve has in its possession approximately $150 billion in warehoused currency. Let's assume this figure is true. We do not know if it is true, because, interestingly, the Fed has never been audited. Whether this currency is new and uncirculated, worn and nearly useless, a gleam in someone's eye, or in usable denominations I do not know.

Lets add up the pieces:

$045 billion = banks' currency reserves
$060 billion = current production to 1/1/00, $1.5 bill * 40 weeks
$100 billion = Fed warehouse, 150 * 2/3 (assumes 2/3 usable bills)
----
$205 billion
Roughly, this is the best total figure I can come up with for ALL usable currency that will be available in the US by 1/1/00. This is approximately $2000 per household -- $200 billion/100 million households. This "should" be enough currency.

Now, here are the extenuating circumstances. The banks' total reserves (the fraction they hold in fractional reserve banking) is approximately $45 billion. That's $450 per household. At that point, all banks are technically busted. And at around $800 per household, the FDIC's bailout fund is busted, too. However, the Fed will likely loan the banks as much currency as they will need, short term, up to the $2000 per household maximum, if it comes to that. And, as before, this should be enough. However, IMO, if the banks are run through this particular ringer, it will take a decade for the system to recover, if it doesn't simply implode along the way.

Please note that no consideration has been given for retiring worn currency, nor forcing people to accept large denominations or makeshift currency substitutes on withdrawal, nor attempting to coerce offshore currency to repatriate, nor the tendency for other countries to attempt to pull more US currency out of the US as a hedge against their own currencies.

Your comments are welcomed.

-- Nathan (nospam@all.com), March 06, 1999.

Just wait until the stock market crashes - that stash will be gone overnight. And I don't think foreign investors in the U.S. market are going to leave their cash in U.S. banks!

-- @ (@@@.@), March 06, 1999.

Nathan, I don't argue with much you say in the post above. The one minor point that I'm not sure I understand is your assertion that the $468 billion figure includes currency which has been bundled and burned.

It was my general understanding that the average One-Dollar Bill had a useful life of about 18 months, and that then it was officially disposed of by the Treasury. It was my presumption that bank tellers make some determination if a bill was not useable and then placed it in a stack for retirement and replacement. I can't imagine that the federal reserve bank would fail to take this into account in determining the value of outstanding notes. But, this is a minor point. I agree with you that there is a thin margin separating success from failure in the banking scheme, especially when facing this strange y2k phenomenon.

-- Puddintame (dit@dot.com), March 06, 1999.

An icy thought just went through my mind as I was reading the responses to this thread. Do any of you old timers remember, "Invasion Money"? Formally known as, "Military Post Script" There must be tons of it in wherehouses around the country. If there was martial law, why couldn't they issue this MPC and declare it the coin of the relm? They could attach any value to it, say, 10 greenback dollars for 1 MPC dollar. Starting March 1, 2000, all greenback will have no value. That would make hoarding money a stupid thing to do. Hell, they could change the color of the script every quarter. If your stuck with the wrong color money your out of luck. It sure would help to circulate money and stimulate the economy. Didn't Hitler do something like this to stimulate the German economy?

Bill in South Carolina

-- Bill Solorzano (notaclue@webtv.net), March 06, 1999.

Bill, I'm not a real student of monetary systems, but I think that the only way the govt. could make greenbacks worthless would be to flood the market with billions of dollars worth of notes, and that's not a practical possiblity. My thinking is that even in the former Soviet bloc (where dollar bills were illegal) they were not only used but were much more highly prized than the official currency. It's my guess that if the govt. issued script and "outlawed" greenbacks, we'd just have a black market in greenbacks right here in the US.

I don't see things getting that bad in the US. If it does, gold bullion would be handy. (Of course, that would be illegal too.)

-- Puddintame (dit@dot.com), March 06, 1999.

Why would you believe any government figures given their track record on Y2K.

I tell you I never had sex with that women.

-- Do You Get It (here@my_wits.end), March 06, 1999.

Puddintame,

I think that Nathan's "The total float of ALL Fed currency ever issued and not retired, i.e., bundled up and burned due to wear and tear, ...." meant to exclude the bundled and burned from the float. I infer this from the "and not retired, i.e. etc" part of that sentence.

Jerry

-- Jerry B (skeptic76@erols.com), March 07, 1999.

Jerry, Of course, you are right. I just misread that for some reason.

-- Puddintame (dit@dot.com), March 07, 1999.

Nathan, thanks for your summary.

You mention points where the banks or FDIC will go bust. In theory that is correct. However, the government has the choice to nationalize some or all of the banks and the FDIC. This is basically saying that the government (thats us folks) will back the banks.

Nationalizing can create a temporary release of tension while the government gets more time to print more money. By printing one thousand dollar bills people will get all their money back; guaranteed. The money wouldn't be worth much but the FDIC would have done its job.

Nationalizing is only a tempory fix but it could get us up to Jan 1, 2000 where the blame could be put on the y2k transitions problems. A run on the banks is more of a problem for the citizens than for the banks.

Ask not for who the banks fold. They fold for thee.

-- Tomcat (tomcat62@aol.com), March 07, 1999.

Nathan,

In your addition to a total of $205 billion, I don't see any inclusion of the "approximately $110 billion is already in circulation" that you mentioned just a couple of paragraphs earlier. Shouldn't your total be $315 billion then? And the per-household figure be over $3000 instead of $2000?

-- No Spam Please (No_Spam_Please@anon_ymous.com), March 08, 1999.

No Spam,

Your estimate of $315 billion is right, in the larger sense. However, as previously explained, that $110 billion of the current circulated amount is already being used for "normal commerce". i.e., it's the amount already in cash registers, petty cash boxes, people's pockets, company safes, etc. The $205 billion represents the "extra" amount of currency above and beyond the "normal" amount in circulation that could become available to those who have expressed a desire to have extra cash for the Y2k rollover.

-- Nathan (nospam@all.com), March 08, 1999.

Tomcat,

I think the FDIC is already nationalized. That's the "Federal" Deposit Insurance Corporation. They are mainly funded by their member banks, but, ultimately, when things get dicey, the hapless taxpayers are the ones on the hook, as they are for every other corporate socialism scheme that Congress has devised and dumped on The People.

Nationalizing individual banks probably won't happen, as the Fed will probably view any stress the banks come under as temporary and Y2k induced. However, if things fail to pick up on the other side of 1/1/00, I don't doubt that the weaklings will be absorbed by other, less stressed institutions. If ALL the banks get toasted, then yes, nationalization may come into play.

Also, I don't think the Fed has any $1000 notes. Those denominations haven't been printed in years. In fact, if you have a $1000 note, it is worth a VERY nice premium over face value. Check with any coin dealer. Of course, for all we know, the Fed could be printing $1000 notes right now as a contingency. Or maybe not.

-- Nathan (nospam@all.com), March 08, 1999.