While everyone knows that the iconic U.S paper dollar bills are used across the globe, particularly in countries without their own stable currency, as the best way to ensure that each side of a transaction gets a fair deal. The U.S Department of Treasury Bureau of Printing and Engraving still seems to be overproducing the notes.
Figures Do Not Match
While it is to be expected that the U.S. needs to print considerably more currency than just the notes required for domestic circulation, as the dollar is still the world’s reserve currency. The number of notes in circulation globally has jumped from a value of $423 billion twenty years ago to $1.38 trillion this year.
This represents an almost threefold increase in the number of circulated notes worldwide despite the domestic population in the U.S. only growing by 21 percent. Even more bizarrely, the number of $100 bills in circulation dwarfs the total amount of all the other U.S denomination bills. At present the $100 bill represents 78 percent of the total value of U.S. paper money in circulation.
Reasons for the Increase
There are two key reasons that economists cite that could explain this continuing over protection of paper money. The first is that inflation is being under reported which can increase the amount of money in circulation. However, the more likely reason is the ever increasing amount of paper money being shipped abroad, particularly to regions where the U.S is, or was just recently, engaged in conflict.
The more cynical view is that the U.S. government is purposely devaluing the value of its paper money by over producing it. At current gold values, the cost of producing a new $100 bill is only 12.3 cents per note meaning that the Fed can produce over $50 billion in currency for just under $70 million.
The direct correlation between gold and the dollar has been over for some time now, but at current gold prices of around $1,200 a troy ounce, the Fed can print $1,200 to buy an ounce of gold for a total cost of $1.48. This kind of discrepancy explains why many countries such as China and Russia are scooping up gold for its real value rather than hoarding dollars for its perceived one.