The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional?

For example, here's the ratio of the value of cash to GDP in the Euro Area: enter image description here

Cash: Notes and coins in circulation (Currency)

Possible reasons:

  • Shadow economy is growing.
  • More cash = more corruption.
  • Lack of financial literacy.
  • Feeling of safety. Lack of trust towards technology and banking system.

What is the main reason why the cash in circulation is on the rise in rich countries?

  • $\begingroup$ Is this cash in euro bank notes and coins held inside the euro zone, or euro banknotes and coins in circulation worldwide? $\endgroup$ Aug 16, 2019 at 8:33
  • $\begingroup$ The biggest part of this since 2010 is the growth of €50 notes as shown in ecb.europa.eu/pub/economic-bulletin/articles/2018/html/… $\endgroup$
    – Henry
    Aug 16, 2019 at 8:38
  • $\begingroup$ @GradaGukovic I guess Worldwide. But the emphasis is not on the EA or Euro itself. I can reproduce this figure in the case of the US and dollar as well. $\endgroup$ Aug 16, 2019 at 8:54
  • $\begingroup$ @Henry Thank your Henry. Yes, but why? $\endgroup$ Aug 16, 2019 at 8:55
  • 2
    $\begingroup$ In your question, there is a graph. May I ask where this graph is from? $\endgroup$
    – user18
    Aug 27, 2019 at 8:23

1 Answer 1


For starters, I've confirmed your results for the United States using data from federalreserve.gov and alfred.stlouisfed.org:

Cash to GDP % in $USD

If we take a look at the breakdown of bills in circulation, we can see that the value of $100 bill has drastically increased relative to the total value of bills in circulation but the others bills have not.

bills/currency ratio

So people are indeed using cash less often for everyday purchases that most likely involve lower denomination bills. In short, people are most likely hoarding more cash in the form of higher denomination bills as a result of recent interest rate trends. According to a blog post by the St.Louis Fed, "the nominal interest rate on short-term bonds has declined essentially to zero, and, in this case, the best form of risk-free liquid asset is no longer the short-term government bonds, but money."

You might ask why people wouldn't just hold more money in electronic currency versus paper cash? If we compare paper cash to MZM (which includes various forms of electronic currency storage), we see that the % of the value in paper cash have actually gone down.


That said, if there was more confidence in technology and banking system, the % in paper cash could decline further. There also seems to be some arguments for a larger underground economy in the US since 2008. I couldn't find any long-term trends on financial literacy, but I also don't see how it would affect people to use paper cash over other forms of credit.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.