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demand for cash

A record quantity of $50 bills was printed in the United States last year. We’re talking about a total of 756,096,000 bills printed in a single year. This represents the highest printing of $50 bills in the past 40 years and more, amounting to approximately $37.8 billion in cash. In 2019, only 3.5% of all U.S. printed bills were $50 bills. In 2022, this percentage has increased to 8.5%! Normally, the $50 bill is an uncommon and somewhat unpopular denomination. Before the pandemic, this denomination was one of the least ordered, just after the $2 bill. However, due to increased demand for cash during the pandemic, the Fed ordered more $50 bills than usual.

The total value of circulating currency is also expanding

This phenomenon is not limited to $50 bills. The overall demand for cash has continued to increase in recent years. Yet, there is an average number of cash payments lower than pre-pandemic levels. For example, in October 2022, the value of circulating currency exceeded $2.23 trillion. This is an increase of 28% compared to February 2020. However, there has been slower growth since 2021. Everyone can draw their own conclusions from this information. But it suggests that Americans are hoarding cash.

People store dollars in times of uncertainty

Studies from the Diary since 2020 show that a significant factor in this increased demand is the holding of cash by consumers, both on them (cash in pockets, purses, or wallets) and as a store of value (cash held at home or elsewhere). Both measures have remained high compared to pre-pandemic levels. This once again confirms that the demand for cash increases in times of uncertainty.

The demand for liquidity has indeed increased due to economic and geopolitical uncertainty. This is despite the temporary closure of businesses during the pandemic-related lockdown. In other words, although Americans are using less cash for their daily purchases, the demand remains strong for paper dollars. These funds are presumably accumulated by consumers to cope with future financial uncertainties.

A particularly important conclusion from the 2022 Diary results is that most consumers do not intend to stop using cash in the near future. Moreover, about one in five consumers stated that cash was still their preferred payment method for in-person purchases. At a time when the possibility of a digital currency is increasingly discussed (see CBDC, an innovative digital currency?), these data are rather surprising.

It’s hard not to draw a connection between this strong demand for paper money and the erosion of trust in the banking system (see Can we still trust the banking system?). Indeed, the spectacular bankruptcies of several American banks this year have created a wave of doubts. It is now clear that many Americans simply do not want to leave all their money in the bank.

By Olivier Langlois-St-Laurent


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This information has been prepared by Pascal Charpentier who is a Portfolio Manager for iA Private Wealth Inc. Opinions expressed in this article are those of the Portfolio Manager only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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