NPR’s Planet Money series recently did an interesting story. The piece sought to answer what at first glance might seem like a seemingly simple question: where are all the U.S. dollars out there?
According to the Federal Reserve, the total amount of U.S. currency in circulation is about $900 billion. That figure isn’t referring to dollar denominated deposits in banks or investment accounts around the world. We’re talking about “cold hard cash” changing hands every day. Actual dollar bills in the wallet – $5′s, $10′s and $20′s or, if you’re lucky, a “Franklin” in the Christmas card from Grandma.
That works out to about $3,000 per American – including babies, teenagers and the elderly. But if you look into the wallet of most people you won’t see that sort of cash (at least not in mine anyway). So it must be in bank ATM machines and retail cash registers, right? Under mattresses? Shoe boxes? Not really. They’ve looked into that and apparently those bills only make up a small portion of the total amount. So where is all this cash then?
David Kestenbaum of NPR talked with two economists who have their theories. Richard Porter speculates that about half of the money is abroad – the farmer in Argentina or the waiter in Istanbul will hold on to dollars to hedge against rapid inflation of their local currencies. But this still leaves a big chunk – something in the neighborhood of $300 billion – unaccounted for. Economic sleuth Ken Rogoff says this money likely resides in the underground economy off the radar of the IRS.
For all you The Wire fans out there, you know what that means; the money is with drug dealers in cities like Baltimore who are trying to avoid taxes and jail time. So instead of depositing those bills in banks for safekeeping, criminals doing business in the “informal economy” stash their mula in so-called “safe houses” vulnerable to the brazen hold-ups of the shotgun wielding Omar.
This broken money trail leads to one obvious question: shouldn’t the U.S. government be doing something about this since they are losing potential revenue? After all, the Treasury Department could use the extra help these days. Yep, the Feds probably should be trying to track the missing loot but after all we’ve seen over the past few months, David Simon’s fictional characters on “the street” seem a little less unsavory in light of the billion dollar investment scams which have been unearthed lately.
So if the government really wants to find the missing money, they don’t need to go far. There are enough white collar criminals on Wall Street to keep them busy for a while. The Treasury could start by opening their checkbook.
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