Quick, how much cash is in your wallet? If you’re like the average American, barely enough for a couple of movie tickets: The median consumer carries just $22.A handful of people roll bigger. Roughly one in five people carry more than $100. One in twenty carry a pickpocket’s dream—$100 bills—according to a new study by Claire Greene and Scott Schuh of the Federal Reserve Bank of Boston. They were trying to shed light on some of the biggest mysteries about U.S. currency: Where is it all? And why do certain people carry so much more than everyone else?
The answers matter to tax collectors, who lose billions each year to the underground cash economy, and to banks and tech startups betting that the future is cashless. So far the evidence suggests the contrary. The amount of cash in circulation keeps rising. There’s $1.2 trillion in cash outside banks, up 20 percent since 2011. Use of credit and debit cards is growing, too, but they’re mostly taking over where checks left off. Cash is still used for 40 percent of all purchases, and from 2003 to 2012 the amount of cash pulled from ATMs rose 32 percent faster than inflation.
Most of this cash use is impossible to track. That’s one of cash’s virtues for those hiding from the police, the IRS, marketers, and data miners, and in the U.S., many assume these $100 bills are mostly used by criminals or tax evaders. Some, such as Harvard University economist Kenneth Rogoff, have suggested that the $100 bill be taken out of circulation.
But in Greene and Schuh’s survey, 5.2 percent of consumers readily admitted to carrying one or more $100 bills. The researchers found no evidence these people were anything but law abiding, Schuh says. There's a less nefarious reason the share of $100 bills in circulation has doubled in the past 20 years. It takes more $100s to make a big purchase than it used to: Inflation has cut the value of the $100 bill, the largest bill in circulation, by 45 percent over roughly the same 20-year period.
In fact, people who carry around lots of cash aren't that different from anyone else, with one important distinction: They make more money. Consumers who make more than $75,000 are about 50 percent more likely to be carrying around $100 than those who make less than $35,000....MORE
That's George Cruikshank's 1837 illustration of the Artful Dodger going to work in 'Oliver Twist'.
