Cash Is King

The FRED series CURRCIR is one of the longest continuous economic datasets in existence, stretching back to January 1918 — the year World War I was still being fought, the Spanish Flu was about to kill 50 million people, and a dollar was backed by gold. That month, there was $4.0 billion in physical U.S. currency in circulation. It was real money in a visceral sense: gold certificates, silver certificates, and Federal Reserve notes, each promising something tangible in return.

By January 1929, on the eve of the Great Depression, that figure had grown to $4.5 billion. Then came the Crash — and something remarkable: the amount of currency in circulation increased during the Depression, not decreased. Americans pulled cash from failing banks and stuffed it in mattresses, cookie jars, and safe deposit boxes. Currency rose from $4.5 billion to $5.4 billion between 1929 and 1933. The money didn’t disappear. It went into hiding.

World War II launched cash into a new era. The U.S. government printed money at an unprecedented pace to finance the war effort, and soldiers carried dollars to every theater of operation. Currency doubled from $8.6 billion in 1941 to $25.2 billion by 1945. After the war, the amount barely dipped — much of it stayed overseas, where the dollar was becoming the world’s reserve currency. By 1950, there was $27.2 billion in cash, and the number would never be lower again.

For the first eight decades of the series, currency growth was predictable. It took from 1918 to 1993 — seventy-five years — to go from $4 billion to $331 billion. Steady, unremarkable compound growth, averaging about 6% per year. The post-war era saw reliable expansion as the economy grew and inflation pushed up the face value of transactions.

Then the curve steepened. Currency crossed $500 billion in 1999, powered by Y2K fears (Americans hoarded cash in case ATMs failed) and the growing international demand for dollars. It crossed $1 trillion in 2012. And it reached $2 trillion in 2021, driven by the COVID panic.

The doubling times tell the story of acceleration. From $100 billion (1985) to $200 billion (1987): 2 years — but that was a one-time surge from financial innovation. From $500 billion (1999) to $1 trillion (2012): 13 years. From $1 trillion to $2 trillion (2021): 9 years. Cash is growing faster than ever, even as digital payments claim an ever-larger share of transactions.

In March 2020, as COVID-19 shut down the global economy, something almost primitive happened: people hoarded cash. ATM withdrawals surged. The Federal Reserve ordered extra shipments of physical currency from the Bureau of Engraving and Printing. In the 12 months from January 2020 to January 2021, currency in circulation jumped from $1.80 trillion to $2.09 trillion — an increase of $295 billion, or 16.4% in a single year.

That $295 billion surge was the largest one-year increase ever recorded, both in dollar terms and in percentage terms. To put it in perspective, it normally took about three years for currency to grow by that amount. The surge happened despite the fact that most transactions were moving online. Grocery delivery, e-commerce, and contactless payment all boomed during lockdowns. Yet people still wanted physical cash — not to spend, but to hold.

The psychology is revealing. Cash is the ultimate insurance policy against systemic failure. When people feared that banks might close, ATMs might go down, or the financial system might seize up, they reverted to the oldest form of money. The same pattern appeared during the 2008 financial crisis (currency jumped 10.6% in 2008–2009), Y2K ($83 billion pulled in the fall of 1999), and every major period of uncertainty. Cash represents trust — or more precisely, the absence of trust in everything else.

The Federal Reserve estimates that roughly 60% of all U.S. currency — about $1.4 trillion — is held outside the United States. The $100 bill accounts for more than 80% of the total value of currency in circulation, and it’s overwhelmingly held overseas. In the bustling markets of Lagos, the black-market exchanges of Buenos Aires, the mattresses of Moscow, and the safes of Dubai, the Hundred is the world’s most trusted store of value.

Why do foreigners hold American cash? Three reasons. First, the dollar is the world’s reserve currency, accepted everywhere as payment. Second, many countries have unstable domestic currencies — the Argentine peso, the Nigerian naira, the Turkish lira — and their citizens prefer to save in a currency that doesn’t lose 50% of its value every few years. Third, cash is anonymous. It leaves no digital trail. This makes it essential for the informal economies that dominate much of the developing world — and, less charitably, for drug traffickers, tax evaders, and sanctioned entities.

Kenneth Rogoff of Harvard has argued for years that the U.S. should eliminate the $100 bill to combat crime and tax evasion. The European Central Bank actually stopped issuing the €500 note in 2019 for this reason. But the U.S. Treasury has shown no interest in following suit. The seigniorage — the profit from printing money — is simply too valuable. Each $100 bill costs about 17 cents to produce. The government effectively borrows $99.83 interest-free for the life of that bill. Multiply that by 16 billion hundred-dollar bills in circulation, and the profit is staggering.

There’s also a geopolitical dimension. Every dollar held overseas is a vote of confidence in the American financial system. If the U.S. eliminated the $100 bill, that demand would shift to euros, Swiss francs, or gold — undermining the dollar’s role as the global reserve currency. The $100 bill is, in a sense, a tool of soft power.

Here is the paradox of modern money: cash use in transactions is declining, but the amount of cash in existence keeps rising. The Federal Reserve’s Survey of Consumer Finances shows that cash accounted for just 16% of all transactions by value in 2023, down from 40% in 2000. Credit cards, debit cards, and digital wallets dominate consumer spending. Many businesses have gone entirely cashless. Some young people have never written a check or visited a bank branch.

Yet currency in circulation hit $2.36 trillion in January 2025, a new record. The amount of cash per capita is higher than at any point in history. The resolution of the paradox is that most cash isn’t being used for transactions at all — it’s being held as a store of value. It sits in safes, under mattresses, in cash registers as float, in vaults as reserve, and in foreign economies as insurance. The “velocity” of physical cash — how many times each bill changes hands per year — has plummeted even as the stock of cash grows.

Sweden, which is further along the cashless journey than any other country, saw cash in circulation decline by 50% between 2007 and 2020. But Sweden is an outlier: a small, homogeneous country with universal banking access and extremely high social trust. In the U.S., an estimated 5.9 million households remain “unbanked” — they have no checking or savings account at all. For these families, cash isn’t a preference; it’s a necessity. And in much of the developing world, cash is still the primary medium of exchange. The death of cash has been predicted for decades. The data says otherwise.