Are there any estimates on how many US Dollars are lost or destroyed
annually? By "lost or destroyed", I mean permanently removed from
circulation because the currency is no longer usable.
The link I offered as a comment covers this question nicely.
When Currency Is Physically Destroyed
Obviously, not all money is electronic. Just look at your wallet.
Bills and coins are destroyed every day. There are three destroyers of
money, and they're the same ones who create and regulate it.
(1) The Bureau of Engraving and Printing and (2) The U.S. Mint
The U.S. Bureau of Engraving and Printing creates all of the nation's
bills, while the U.S. mint creates its coins. But they also destroy
Banks and individuals will hand over "mutilated" bills and coins to
these agencies. They then validate its authenticity and issue a
Treasury check in return. The Bureau of Engraving and Printing
receives around 25,000 mutilated currency redemption claims annually.
Each bill is shredded and sent to waste energy facilities for
Here is a great video I found on the subject.
For instance, if I had a briefcase full of $100 bills that I either
misplace (any nobody ever finds it) or toss into a fire, that money is
no longer usable and cannot circulate within the economy. How much
money is lost or destroyed in ways like these annually?
I'm primarily interested in estimates for physical currency, but would
be interested in other means of money loss (can this happen
electronically?) as supplementary information.
By your situation previously, it is neigh-impossible to track such bills in circulation. As these bills don't transmit a signal as to their location, or who the buyer/seller is in a private party transaction. i.e. I meet up with you to buy your phone and pay in cash.
But at the same time, all US bills are serialized, meaning each are unique. A 1 dollar bill might have the same value as another $1, but each has its own unique identifier (serial number). When the US Treasury (through the Mint for coins and Bureau of Engraving and Printing for paper bills) issues new currency, the flow and supply chain of the money is tracked from its raw materials (ink, cotton, etc.) to distribution (banks, credit unions, foreign countries). Whenever a bill 're-enters' the system (i.e. deposited at a bank) the serial can be tracked from its origin point to its reentry point. However I am unaware of a system that can actively track its location in between.
At the same time, counterfeits are also taken into account the total supply of US dollars in circulation.
As for electronic loss, the current ACH System acts like a central authority that syncs all of the electronic activity that takes place. This is why when you pay, items on your bill are 'pending' until a couple of days later when they are 'posted'. At the same time, banks have several layers of backup systems and redundant systems to ensure 100% up-time and preventing data-loss.
Some reading to get started, but by no means definitive.