According to the Federal Reserve System there is approximately $600 billion in cash circulating around the world. usprintedmoney

According to the US Treasury, approximately $750 million dollars of US currency are printed annually primarily to replace aging/damaged/worn currency

During fiscal year 2007, the Bureau of Engraving and Printing (BEP) produced approximately 38 million notes a day with a face value of approximately $750 million.

What can be derived from these two pieces of information?

We can posit that Americans generally “consume” approximately $750 million in cash yearly.   By “consume” I mean “wear out” the currency to the point where it needs to be replaced.  If there are 300 million people in the US trading dollar bills in the amount of $750 million then on average $2.50 is traded yearly between people.   That’s sound a bit odd doesn’t it?

If we look at the population demographics:

  • 0−19 years: 27.4% (male 42,667,761; female 40,328,895)
  • 20−64 years: 60.1% (male 89,881,041; female 90,813,578)
  • 65 years and over: 12.6% (male 15,858,477; female 21,991,195)

We can make some assumptions, the 0-19 will likely not have too much cash on hand so the remainder of the populous will be dealing with mostly cash transactions which gives us aboute 113 million people.   Doing the math again we get roughly $6.60 per transaction.

How can this puny amount be correct when you know you spend at least $10 on lunch, $20 on gas, and $5 on Starbucks every other day?   The answer is that the remainder of the transactions are done with CREDIT and not cash.   If these transactions were being conducted in cash, the amount of currency in circulation would need to grow exponentially.

So let’s take a leap of faith, what happens when the CREDIT disappears?   How will these transactions be conducted if they are still necessary?   The only solution is to utilize cash.   Where do most people keep their cash?   At the bank!   What happens when banks run out of credit to give and have a sudden and huge demand for cash?

As for the other cash circulating around the world, it’s doing just that, circulating around the world in respective countries to conduct business transactions or to use as a store of value.

It’s not too difficult to figure out, all you have to do is follow the money and do the math.

Note that I’ve used various assumptions, get out your spreadsheet and run the numbers any way you like and you’ll be able to figure out more or less when the bank runs will begin, it’s not rocket science it’s basic math.