How Much Money is in Circulation Today?

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The Bureau of Engraving and Printing has quite the task of determining just how much money should be printed and distributed each year.  Once the number of economic importance has been figured out, the fun part of shredding old bills to compensate for the new ones takes place and the value of a dollar is balanced out.  Have you ever wondered though just how much United States currency is circulating through the world right now?

Money in the United States changes hands constantly. Each day, millions of U.S. dollars and coins are circulated throughout the economy. Visual Economics has put together a graphic, shown below, which illustrates the amount of money in circulation, broken down by number of bills.  While the graphic is from 2008, the percentage of bills is very comparable today.

A more recent number provided by the Federal Reserve Statistical Release at the end of April 2010, shows that total USD currency in circulation was $878.8 billion. Many people believe that it is the Federal Reserve that prints our money, however, in actuality the Bureau of Engraving and Printing (BEP) produces the paper currency, while the U.S. Mint produces the coinage. Further, up to two thirds of U.S. currency in circulation worldwide is held outside of the United States.

After the currency is minted, the coins and paper are sent to the Federal Reserve Banks (collectively, the “Fed”), twelve in total throughout the United States, and to some large banks within each Federal Reserve Bank district. It is the responsibility of the Fed to decide the amount of money in circulation. The Fed regulates the supply of money using:

  1. The Discount Rate – The interest rate the Fed charges to financial institutions for short-term loans of reserves.
  2. Reserve Requirements – The percentage of deposits in demand deposit accounts financial institutions must hold in reserve.
  3. Open Market Operations – The Fed buys or sell U.S. Government securities on the open market to influence short-term interest rates and the growth of the money and credit aggregates.

The Fed establishes monetary policy with the aim of sustaining economic growth. However, changes in the money supply impact interest rates as well as exchange rates. When the economy needs to be stimulated, or an increase in the growth rate of the money supply and credit is needed, the Fed steps in and buys U.S. government securities. This increases the amount of bank reserves. As a result, the federal funds rate, the rate on overnight loans between banks, decreases as banks are more willing to lend each other reserves. Other short term rates also decrease as the increase in supply of loanable funds decreases the equilibrium rate for loans. Longer-term interest rates also decrease.

The decrease in rates causes the dollar to depreciate in the foreign exchange market.  The reduction in interest rates at home leads to capital outflow, as money flows out to take advantage of higher interest rates abroad. The opposite occurs when the Fed is attempting to “cool” down the economy and stem inflation (too much money chasing too few goods causes an increase in prices). In this situation, the Fed sells U.S. government securities. As a result, the amount of bank reserves decreases, in turn, raising the Federal funds rate and other long-term rates. The increase in rates causes the dollar to appreciate, as investors demand the dollar because of its attractive yield.

Keeping the economy in check has always been a tough job for the US Treasury and with the more money put into circulation the more difficult the job becomes.  While $878 billion in circulation is a ton of money, it may not be as much as you thought.  Projects have over $1 trillion in circulation before 2020 and if you’ve ever tried to visualize that amount of money, you know just how large that sum is.

Published or Updated: February 16, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Nancy says:

    good finance info

  2. shweta santosh says:

    thank you ……….
    for the all finance information ………..
    the discount rates and interest rate are well………………..

  3. Craig J Casey says:

    giant counterfeiting operation.

  4. vinodh says:

    very useful info. I thought that central banks can print money to any extent they want . I came to this blog by google search on money saving tips

    • dan balfour says:

      They might not physically print it but they are in charge of the money supply. 40 billion new greenbacks will find their way into circulation each month every month for how ever long it takes to collapse the system.

  5. Joe Joe says:

    Just a thought to help keep people informed and sort out some of the confusion. Everyone should know that the Federal Reserve IS NOT a part of our government. Do I need to repeat that for the uninformed? Ok, the Federal Reserve IS NOT a part of our government! Did you get it that time? They are in fact PRIVATE, NOT Federal!! They would have you believe they are with their name. If I were gonna come up with a name to dupe people, I couldn’t do a better job. I am absolutely amazed at how uninformed most Americans are. WAKE UP AMERICA!!! We are being taken over, and their pawns (puppets) have us in check. You know what comes next, and it won’t be pretty.

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