Dollar still king as supply of cold cash soars unabated
THE TRUMP administration may have softened the US’ strong dollar policy and sent the greenback lower, but the supply of cold, hard American cash is alive and well.
In an era of electronic payments and digital currencies, the amount of US currency in circulation has increased unabated. The weekly average value of paper notes and coins in circulation reached a record of $1.62 trillion earlier this month, according to Federal Reserve data.
While that’s not surprising given the world’s largest economy is in the ninth year of an expansion, the increasing supply of physical US currency is outpacing gains in gross domestic product. It also comes as the value of the greenback falls relative to other
currencies, with a Bloomberg index measuring the dollar having dropped about 10 percent over the past year.
So what’s behind the pickup in cash despite the proliferation of digital options such as Apple Pay and Square? Economists say several factors may help explain why.
For one thing, there is still a significant portion of Americans who don’t have a bank account or use traditional financial services. Nine million households were “unbanked” — meaning they deal exclusively in cash — in 2015, according to the Federal Deposit Insurance Corp.’s latest study.
What might also be sustaining the cash craze is demand abroad. About 60% of American dollars are held outside the US, according to San Francisco Fed research. The dollar is among the most sought- after safety nets, sources of stability and store of wealth in a global economy, they said.
More sinister factors are at work, too. Regulators have cracked down on the flow of illicit funds following the financial crisis. “Moneylaundering rules have in fact pushed more underground activity, out of banks and into cash transactions and that has kept demand very high,” said Lou Crandall, chief economist at Wrightson ICAP LLC. — Bloomberg