Thursday, February 17, 2011

Cash and Carry, Numbers for Fun

Constant chatter about the declining value of the U.S. dollar combined with talk of diversification into euros (€), Japanese yen (¥), Aussie (A$) dollars, Canadian (C$)dollars, Swiss francs (CHF), and Chinese yuan (RMB) suggest that it might be fun to look at the amount of currency in circulation in these countries.  (Paper money transactions are relatively small compared with checks, credit cards, debit cards, and electronic transfers.)

Switzerland is widely regarded as a cash-based society with few individuals having personal checking accounts.  Swiss paper money in circulation at the end of 2010 was CHF 47,136 million, the population 7.8 million, yielding CHF 6,043 per resident.  (CHF 1, A$1, and C$1 each roughly equal US$1.)

Australian currency in circulation was A$48,760 million, population 22 million, producing A$2,216 per resident.  Canadian currency in circulation was C$57,861 million, population, 34.3 million, amounting to C$1,687 per resident.  Chinese currency in circulation was RMB 4,865 trillion (US$739 billion), population 1.3 trillion, yielding US$551 per resident.

U.S. dollars and Euros are more problematic.  Seventeen European countries with a combined population of about 330 million use euros as their official currency.  In addition, euros circulate widely in other Central and Eastern European countries.  The printing of €500 bank notes makes them more attractive than dollars to carry in large amounts.  Thirty-four percent of outstanding currency consisted of €500 banknotes, with €50 notes amounting to 33%.

At the end of 2010, the European Central Bank reported that €840 billion in paper money was outstanding.  Adjusting up the 330 million persons living in eurozone countries by another 20 million or so that use euros in daily commerce, yields €2,400 per person.

U.S. currency outstanding in December 2010 was $916 billion.  Divided by 308 million U.S. residents yields $2,975 per person.  The Federal Reserve Board of St. Louis estimated that in 2005 about half of U.S. paper money was held overseas.  Assuming a similar ratio in 2010 reduces the amount held in the U.S. to about $1,490 per person.  Of the $916 billion, about 75% consists of $100 notes.  The next largest share is $20 bills, just under 14% of the value of outstanding notes.  The predominance of $20 bills is due to their dispensation from ATM machines.

Switzerland clearly stands as an outlier, which reflects the Swiss preference for paper money rather than other forms of transaction money which are traceable to specific account holders.  Almost 59% of the value of Swiss banknotes outstanding consists of CHF 1,000 notes (but don’t try to pay for a taxi ride with a CHF 1,000 bill).  China’s smaller number reflects its much lower income per person than any of the others, but the amount of currency in circulation is likely to rise with growth.  At some point it will become necessary to issue denominations in excess of RMB 100 (US$15.)

It’s interesting to see the preference for untraceable bearer notes in different national denominations. 

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