Nicholas Colas, ConvergEx Group chief market strategist, released a note Tuesday in which it confirmed that the United States government printed three billion $100 bills in the 12 months that ended Oct. 31, according to figures he used from the U.S. Treasury Department’s Bureau of Engraving and Printing (BEP).
Production of the $100 bill is up 100 percent since the collapse of the U.S. economy began in 2007 and is 50 percent more than the total number of $1 bills printed in the same time period. These numbers suggest that there is a healthy demand for $100 bills in both the regular economy and the shadow economy and the demand is still continuing to grow.
Colas explained that $100 bills are the preferred denomination among those in the underground economy’s illegal activities, such as the drug trade, illegal arms transactions and even tax evasion deals. He explained that since the U.S. dollar is in danger of losing its world reserve currency status, the statistics show that it’s sort of an endorsement by the underground entities.
Also, the increase in use of $100 bills could be because there have been delays of a newer version of the note, which has had technical difficulties and the newly printed currency has not yet been in circulation.
Meanwhile, when it comes to smaller denominations, the demand isn’t there. One of the reasons is that many consumers are turning to credit and debit cards to purchase items that are relatively cheaper. The innovation in credit technology has become transparent in recent years as a Visa card can simply tap a machine to purchase a $1.50 coffee or a $0.50 bottle of water.
Nevertheless, Colas identifies that this can be seen as a positive because the $100 bill costs 10 cents to create and the government makes money if they sell a $100 to a private body at face value – it is unclear how much U.S. currency is floating outside of the country.
Denomination statistics for fiscal year 2012:
– $1: 2,022,400,000
– $2: 134,400,000
– $5: 729,600,000
– $10: 652,800,000
– $20: 1,568,000,000
– $50: 246,400,000
– $100: 3,027,200,000
“During Fiscal Year (FY) 2012, the Bureau of Engraving and Printing delivered approximately 35 million notes a day with a face value of approximately $1.5 billion. During Fiscal Year (FY) 2012, the Bureau of Engraving and Printing delivered approximately 8.4 billion notes at an average cost of 8.7 cents per note,” wrote the BEP.
“Over 90 percent of the notes that the BEP delivers each year are used to replace notes already in, or taken out of circulation. Between the Fort Worth, Texas and the Washington, DC facilities, approximately 11.1 tons of ink per day were used during FY 2012.”
Many are questioning why there is an uptake of $100 bills. Some are speculating that it is in fact inflation that is causing the increase of $100 bills because looking at Federal Reserve data suggests that the increase of c-notes has been on the rise since the 1970s. This was the time that the U.S. officially got off the gold standard and made Americans “all Keynesians now.”
Also, the number of items that cost $100 were not as substantial as they are today.
According to charts from the U.S. Bureau of Labor Statistics, the dollar has lost 90 percent of its value since the inception of the Federal Reserve. When comparing the gold and the dollar since 2003, the value of gold has increased, while the dollar has decreased.
Since the collapse of the U.S. economy – and even prior to the crash – there have been a lot of financial experts that have warned about the dangers of the Federal Reserve’s monetary policy initiatives, which have, according to the likes of Peter Schiff, Marc Faber and Dr. Ron Paul, devalued the dollar even more.
“Inflation is theft, you’re stealing value from people who save money,” said the retiring libertarian-leaning Texas Republican Congressman and three-time presidential candidate in a television debate with Keynesian economist Paul Krugman. “So if you have a two percent or ten percent, the value of the currency is lost. And it really destroys an important feature of the economy, and that is savings.”
Economic Collapse News reported in September of the Fed’s announcement of the third round of quantitative easing as well as the $400 billion Operation Twist program. It received negative reaction from much of the mainstream economics establishment.
Due to much of these policies, experts have projected that the price of gold will hit $2,300 in 2014 and could hit $2,500 by the end of 2014. Schiff, the former 2010 Republican Senate candidate and president of Euro Pacific Capital, still sees gold hitting $5,000 an ounce.