Where Has All The Money Gone?

Nearly 80 percent of all U.S. currency comes in $100 bill denominations.

If that’s true, why do so few of us have them stored in our wallets?

That’s what The Atlantic aims to answer in its interesting glimpse into the denominational breakdown of U.S. currency, and many of their findings may surprise you.

The article notes that $100 bills have been on the rise for decades, making up around 55 percent of outstanding U.S. currency in 1991 and growing to 77 percent as of June 30, 2012.

Why has the rate of $100 bills circulated continued to rise, and where are all those bills located?

Inflation may be the cause that first pops into most peoples’ heads, and that’s partially true. As The Atlantic states, “there just weren’t as many things to buy in 1970 that might require one to slap down a $100 bill.” But that’s only part – and likely a small part – of the story.

The bigger cause is, quite simply, that most $100 bills are held outside of the U.S. The “overwhelming majority” of such bills come from the Federal Reserve Cash Office in New York City, which, as the article points out, handles most foreign shipments of U.S. currency. Some believe as much as 70 percent of U.S. currency resides outside of the country, although more modern estimates place that percentage around 25-30 percent.

Why do those outside of the U.S. want to hold on to $100 bills? That depends on the economic climate in which the bills are located.

Economists believe that in poorer countries, $100 bills are commonly held as stores of value, “like mini-Treasury bills that don’t pay any interest.” If you’re in an area with unstable currency or inflation, U.S. bills are amongst the best bets to retain their value in the face of upheaval.

In more developed nations, $100 bills are often used for more nefarious purposes in what is politely terms the “informal economy.”  The illegal drug, arms and human trafficking and prostitution industries see heavy $100 bill use, as they function without the costs (taxes) and benefits (legal protections) of the state.

Maybe you’re better off without any $100 bills in your wallet anyway.

Read The Atlantic’s original story here.