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What’s in Your Wallet? A Printed Piece of $1.34 Trillion

Paper currency has been part of the American mindset ever since Benjamin Franklin pamphleteered for it in 1729. But, folding money has to confront 21st-century trends that could displace it.

By Patrick Henry
Published: January 18, 2016

Technology has driven ink and paper from many realms of life, but there’s still at least one specimen of printing that most people have a hard time giving up: currency. More paper notes are in circulation than ever before, and although trends that could one day displace greenbacks are gaining ground, folding money is—for the time being, anyway—as close to irreplaceable as any product of a printing press can claim to be. 

The Federal Reserve System is the go-to source of information about America’s inventory of paper money. The Fed reports that as of September 30, 2015, the approximately $1.39 trillion worth of currency in circulation included $1.34 trillion in Federal Reserve notes: the printed legal tender manufactured for the Fed by the Bureau of Engraving and Printing (BEP). The Bureau’s web site says that in the 2014 fiscal year, the most recent for which it publishes annual data, the number of notes in print by denomination was as follows:

 

$1

2,278,400,000

$2

32,000,000

$5

563,200,000

$10

486,400,000

$20

1,785,600,000

$50

220,800,000

$100

640,000,000

 

The Fed bases its print orders to the BEP on the useful lives of existing notes. Bills have lifespans in proportion to size of their denominations, with smaller, more frequently passed-around notes aging out of circulation faster than big ones. As old bills found not to be in good condition are removed from the currency supply and destroyed, the Fed replaces them with new ones. In fiscal year 2016, about 70% of the 7.6 billion Federal Reserve notes that the Fed has ordered from the BEP will be to replace “unfit” currency and bills with outmoded designs.

An overview of the Bureau’s manufacturing routines can be found here. According to the BEP, the average cost of a note is 10 cents. In its 2014 Chief Financial Officer (CFO) Performance and Accountability Report, currency users are told that the cost per thousand notes was below standard that year because of production improvements and material cost savings. 

Economic downturns, the rise of cashless payment systems, and other challenges to the sway of paper money haven’t put any discernible dents in the nation’s currency supply.

These charts show that the value and volume of currency in circulation increased every year from 1994 to 2014 (although the graph for yearly print orders reflects fluctuations from recessions). The data seem sharply at odds with the findings of a 2012 survey by the Pew Research Center in which the majority of respondents said they believed “that by 2020 most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards.”

Cash is still king, and portable paper currency remains its most popular form. But, the end or at least the beginning of the end of folding money’s reign as the medium of choice for cash transactions isn’t impossible to conceive. In 2014, for example, a survey by Bankrate found that 9% of those surveyed didn’t carry any cash and that 69% carried less than $50. Other reports, like this one from CNN Money, foresee entire nations dropping out of cash transactions in favor of mobile-pay alternatives. 

Perhaps hard currency will have its best chance at survival in materials harder than paper. The Bank of England thinks so—it has announced that it will start phasing in polymer pound notes in the second half of 2016 to make currency in the U.K. cleaner, more durable, and more counterfeit-proof. In the U.S., an organization called the Dollar Coin Alliance claims that replacing $1 bills with an equivalent metal coin will save taxpayers billions and make many kinds of cash transactions more efficient.

Changes like these may come, but paper currency’s fibers are too closely interwoven with those of American history for any such transformation to be total. In a 1729 pamphlet titled A Modest Enquiry into the Nature and Necessity of a Paper-Currency, Benjamin Franklin observes that no “trading country” can function economically without a universally acceptable medium of exchange. He reasons that with its value properly secured, paper money can and should be that medium rather than unstable commodities like gold and silver.

His argument wasn’t strictly about economics. With his eye already on independence, Franklin goes on to write that “Since a Plentiful Currency will be so great a Cause of advancing this Province in Trade and Riches, and increasing the Number of its People...I cannot think it the Interest of England to oppose us in making as great a Sum of Paper Money here, as we, who are the best Judges of our own Necessities, find convenient.”

It’s safe to assume that if Franklin were to return to us today, he’d want to bring a wallet well lined with negotiable pictures of himself. On the other hand, it’s hard to imagine that the man who took electricity from the sky with a kite wouldn’t be captivated by the idea of paying for things with the touch of a smart phone. Franklin would find it eminently sensible to carry his hard-earned cash both ways—and perhaps so should the rest of us.

Patrick Henry, Executive Editor for WhatTheyThink.com is also the director of Liberty or Death Communications, a consultancy specializing in research, education, promotional, and editorial support services for the printing and publishing industries.

Patrick Henry is available for speaking engagements and consulting projects. To get more information contact us here.

Please offer your feedback to Patrick. He can be reached at patrick.henry@whattheythink.com.

 

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