<p>For starters, I've confirmed your results for the United States using data from <a href="https://www.federalreserve.gov/paymentsystems/files/coin_currcircvalue.txt" rel="nofollow noreferrer">federalreserve.gov</a> and <a href="https://alfred.stlouisfed.org/series?seid=GDP" rel="nofollow noreferrer">alfred.stlouisfed.org</a>:</p>

<p><a href="https://i.sstatic.net/JjV9d.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/JjV9d.png" alt="Cash to GDP % in $USD"></a></p>

<p>If we take a look at the breakdown of bills in circulation, we can see that the value of $100 bill has drastically increased relative to the total value of bills in circulation but the others bills have not.</p>

<p><a href="https://i.sstatic.net/wGZHC.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/wGZHC.png" alt="bills/currency ratio"></a></p>

<p>So people are indeed using cash less often for everyday purchases that most likely involve lower denomination bills. In short, people are most likely hoarding more cash in the form of higher denomination bills as a result of recent interest rate trends. According to a blog post by the <a href="https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us" rel="nofollow noreferrer">St.Louis Fed</a>, "the nominal interest rate on short-term bonds has declined essentially to zero, and, in this case, the best form of risk-free liquid asset is no longer the short-term government bonds, but money."</p>

<p>You might ask why people wouldn't just hold more money in electronic currency versus paper cash? If we compare paper cash to <a href="https://en.wikipedia.org/wiki/Money_supply#Empirical_measures_in_the_United_States_Federal_Reserve_System" rel="nofollow noreferrer">MZM</a> (which includes various forms of electronic currency storage), we see that the % of the value in paper cash have actually gone down.</p>

<p><a href="https://i.sstatic.net/Hvl5z.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/Hvl5z.png" alt="Currency/MZM"></a></p>

<p>That said, if there was more confidence in technology and banking system, the % in paper cash could decline further. There also seems to be some arguments for a <a href="https://www.washingtonpost.com/news/wonk/wp/2013/04/23/americas-2-trillion-shadow-economy-is-the-recessions-big-winner/" rel="nofollow noreferrer">larger underground economy</a> in the US since 2008. I couldn't find any long-term trends on financial literacy, but I also don't see how it would affect people to use paper cash over other forms of credit.</p>

CC BY-SA 4.0
2019-08-29T10:56:31.657Z
2019-08-29T10:56:31.657Z
Kent Shikama
<p>The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional?</p>

<p>For example, here's the ratio of the value of cash to GDP in the Euro Area:
<a href="https://i.sstatic.net/7l9SY.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/7l9SY.png" alt="enter image description here"></a></p>

<p>Cash: Notes and coins in circulation (Currency)</p>

<p>Possible reasons:</p>

<ul>
<li>Shadow economy is growing.</li>
<li>More cash = more corruption.</li>
<li>Lack of financial literacy.</li>
<li>Feeling of safety. Lack of trust towards technology and banking
system.</li>
</ul>

<p><strong>What is the main reason why the cash in circulation is on the rise in rich countries?</strong></p>

CC BY-SA 4.0
2019-08-16T08:33:22.243Z
Is this cash in euro bank notes and coins held inside the euro zone, or euro banknotes  and coins in circulation worldwide?
Grada Gukovic
CC BY-SA 4.0
2019-08-16T08:38:04.310Z
The biggest part of this since 2010 is the growth of €50 notes as shown in https://www.ecb.europa.eu/pub/economic-bulletin/articles/2018/html/ecb.ebart201806_03.en.html
Henry
CC BY-SA 4.0
2019-08-16T08:54:46.190Z
@GradaGukovic I guess Worldwide. But the emphasis is not on the EA or Euro itself. I can reproduce this figure in the case of the US and dollar as well.
Übel Yildmar
CC BY-SA 4.0
2019-08-16T08:55:32.230Z
@Henry Thank your Henry. Yes, but why?
Übel Yildmar
CC BY-SA 4.0
2019-08-29T06:50:00.183Z
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/banknotes+coins/circulation/html/index.en.html
Übel Yildmar
<macroeconomics><finance><money-supply><money><black-market>
Why is the cash in circulation on the rise in rich countries?
Übel Yildmar
# Why is the cash in circulation on the rise in rich countries?

(Asked by: username_0 on 2019-08-16)

The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional?

For example, here's the ratio of the value of cash to GDP in the Euro Area:
[![enter image description here](https://i.sstatic.net/7l9SY.png)](https://i.sstatic.net/7l9SY.png)

Cash: Notes and coins in circulation (Currency)

Possible reasons:

* Shadow economy is growing.
* More cash = more corruption.
* Lack of financial literacy.
* Feeling of safety. Lack of trust towards technology and banking
  system.

**What is the main reason why the cash in circulation is on the rise in rich countries?**

**Tags:** macroeconomics, finance, money-supply, money, black-market
> **Comments:**
> **username_1**: Is this cash in euro bank notes and coins held inside the euro zone, or euro banknotes  and coins in circulation worldwide?  
> **username_2**: The biggest part of this since 2010 is the growth of €50 notes as shown in https://www.ecb.europa.eu/pub/economic-bulletin/articles/2018/html/ecb.ebart201806_03.en.html  
> **username_0**: @GradaGukovic I guess Worldwide. But the emphasis is not on the EA or Euro itself. I can reproduce this figure in the case of the US and dollar as well.  
> **username_0**: @Henry Thank your Henry. Yes, but why?  
> **username_0**: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/banknotes+coins/circulation/html/index.en.html  

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## 1 answers

### Answer by username_3 on 2019-08-29. Score: 3

For starters, I've confirmed your results for the United States using data from [federalreserve.gov](https://www.federalreserve.gov/paymentsystems/files/coin_currcircvalue.txt) and [alfred.stlouisfed.org](https://alfred.stlouisfed.org/series?seid=GDP):

[![Cash to GDP % in $USD](https://i.sstatic.net/JjV9d.png)](https://i.sstatic.net/JjV9d.png)

If we take a look at the breakdown of bills in circulation, we can see that the value of $100 bill has drastically increased relative to the total value of bills in circulation but the others bills have not.

[![bills/currency ratio](https://i.sstatic.net/wGZHC.png)](https://i.sstatic.net/wGZHC.png)

So people are indeed using cash less often for everyday purchases that most likely involve lower denomination bills. In short, people are most likely hoarding more cash in the form of higher denomination bills as a result of recent interest rate trends. According to a blog post by the [St.Louis Fed](https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us), "the nominal interest rate on short-term bonds has declined essentially to zero, and, in this case, the best form of risk-free liquid asset is no longer the short-term government bonds, but money."

You might ask why people wouldn't just hold more money in electronic currency versus paper cash? If we compare paper cash to [MZM](https://en.wikipedia.org/wiki/Money_supply#Empirical_measures_in_the_United_States_Federal_Reserve_System) (which includes various forms of electronic currency storage), we see that the % of the value in paper cash have actually gone down.

[![Currency/MZM](https://i.sstatic.net/Hvl5z.png)](https://i.sstatic.net/Hvl5z.png)

That said, if there was more confidence in technology and banking system, the % in paper cash could decline further. There also seems to be some arguments for a [larger underground economy](https://www.washingtonpost.com/news/wonk/wp/2013/04/23/americas-2-trillion-shadow-economy-is-the-recessions-big-winner/) in the US since 2008. I couldn't find any long-term trends on financial literacy, but I also don't see how it would affect people to use paper cash over other forms of credit.


---

