People in many of the world’s most advanced nations — including the United States, the euro area and Japan — are holding more of it than ever. In the U.S., for example, currency in circulation stood at an estimated $1.76 trillion as of late September, according to the Federal Reserve. That’s about 8.2% of gross domestic product, up from just 5.6% before the 2008 financial crisis and close to the highest level in at least 36 years. Los Angeles Times reports:
If people need less cash to pay for stuff, why do they want to hold so much of it? The answer, it seems, is that they’re turning to currency as a store of value.
Consider the kind of cash they favor: Increasingly, it’s large denominations such as $100 bills, which are the most convenient for stashing away big sums. Benjamin Franklin’s share of total U.S. currency in circulation reached 80% in 2018, up from 73% a decade earlier, Federal Reserve data show.
Since 2017, the $100 bill has surpassed the $1 note as the most widely circulated U.S. currency…
When safe investments such as deposits or government bonds yield little or less than nothing, people aren’t missing out by holding paper money. This illustrates why central banks can’t push rates too far below zero: Instead of spending the money or watching their savings shrink while sitting in the bank, people will just withdraw their cash and put it in the mattress.