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The Mystery of the Missing Money

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The Federal Reserve tells us that more than $1.4 trillion worth of U.S. currency is in circulation. But we only know where roughly 15 percent of that money is—in banks or in regular, everyday circulation in the United States. The other 85 percent of the United States currency supply is simply missing. No one knows for sure where it is or what it's doing. "We call this the currency enigma," said Edgar Feige, an economics professor emeritus, in an interview with American Public Media’s Marketplace. "It’s hard to figure out where this currency is and why so much of it is out there."

There are some good guesses, but no certainties. And those possibilities tell us something about how our economy—and the world's—really works.

The shadow economy

A chunk of the money is probably used in illegal transactions. This shadow economy is enabled by cash, which is generally the most anonymous method of payment. Economists like Feige put the size of the shadow economy—which includes drugs, prostitution and various other misdeeds—at hundreds of billions of dollars. At certain points, that has accounted for more than 20 percent of the country’s adjusted gross income.

But this doesn’t mean that all of the missing money goes into the shadow economy—after all, currency can be used again and again as it passes from person to person. That leads some economists to theorize that a relatively small percentage of the missing currency (less than 10 percent) is part of the black market.

The overseas equation

So where’s the rest of it? Much—if not most—of the money is probably overseas. U.S. bills are still seen around the world as some of the most stable and reliable currency available. So vast quantities of cash are hidden away for a rainy day (some $80 billion in Russia alone).

That’s not necessarily a bad thing. Think of it this way: If someone holds onto U.S. currency, they’re essentially giving the Federal Reserve free money. This concept is called seigniorage, and it’s a bit complicated to explain. Here’s the basic idea: The Fed creates money by buying government bonds from banks. As people demand more dollars—and hold onto them—the Fed buys more bonds to increase the supply. But those bonds earn interest, which means our central bank pockets billions of dollars in pure profit each year.

The Fed scrambles

All of this means that the Federal Reserve has a balancing act on its hands. It has to bring new money into circulation (since that earns it sweet, sweet moolah), but the bank also wants to to keep U.S. currency from being mainly used by gamblers and drug smugglers. In the 1960s, we stopped printing $500 and $1000 bills, as they were almost exclusively used illegally. These days, there's been criticism of the $100 bill for just the same reason. Believe it or not, there are more $100 bills in circulation than $20 bills!

The Fed also wants to make sure that the bills are as secure as possible—the demand makes the $100 an attractive target for counterfeiters. That’s why the $100 was redesigned in 2013.

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Graduates in These States Fare Best When It Comes to Student Debt
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Student loan debt in the U.S. grows larger each year. According to CNBC, the average American in their 20s with student loans to pay off owes about $22,135. But college graduates from some states have it easier than those from others. As Money reports, choosing the right state in which to get your education may end up saving you $16,000 in loan payments.

That number comes from the latest student debt study [PDF] from the Institute for College Access and Success. The organization looked at four-year public and private nonprofit colleges to determine the states where debt levels skew low and where they creep into $30,000-plus territory. Graduates who study in Utah have it the best: 57 percent of students there graduate without debt, and those who have debt carry burdens of $19,975 on average. Behind Utah are New Mexico, California, Arizona, and Nevada, all with average debt loads of less than $25,000 a student.

On the opposite end of the spectrum is New Hampshire, where new graduates are sent into the workforce with $36,367 in debt looming over their heads. Pennsylvania, Connecticut, Delaware, and Minnesota all produce average student debts between $31,000 and $36,000. And though graduates from West Virginia don't owe the most money, they are the most likely to owe any money at all, with 77 percent of students from the state racking up some amount of debt. The variation from state to state can be explained by the types of colleges that are popular in each region. The Northeast, for example, is home to some of the country's priciest private colleges, while students in the West are more likely to attend a public state school with lower tuition.

If you've already received a degree from an expensive school in a high-debt state, you can't go back in time and change your decision. But you can get smart about tackling the debt you've already accumulated. Check out these debt-busting strategies to see if one is right for your situation.

[h/t Money]

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By the Numbers: How Americans Spend (More of) Their Money
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Every day, Americans spend an average of $101, according to Gallup. The bulk of that money goes to housing, food, and, transportation—but a surprising amount of it gets spent on Funyuns. Previously, we broke down where the $10.7 trillion that Americans spent in a single year went. Here’s an updated look at the lesser known slices of America’s big financial pie chart.

Touring Civil War battlefields: $442 million [PDF]

(That’s the tally for 15 NPS Civil War battlefields in five states. “[B]lue and gray makes green,” says Kevin Lanston, a deputy commissioner for tourism in Georgia. [PDF])

Drinking beer on Independence Day: $1 billion

Lighting up fireworks: $800 million

Lighting up (legal) marijuana: $6.9 billion

(“Sales are projected to increase to $21.6 billion by the year 2021,” according to Arcview Market Research.)

Eating Cheetos, Doritos, and Funyuns: $4.8 billion

Fixing car damage caused by potholes: $3 billion

De-icing streets with road salt: $2.3 billion

Buying bags of ice: $3 billion

Shopping for (artificial) Christmas trees: $854 million

Chopping (real) Christmas trees: $1.3 billion

Enjoying the great outdoors: $646 billion [PDF]

(If this number appears inflated, that’s because it reflects the total impact of outdoor recreation, including trip-related sales such as hotels, food services, and vacation expenses.)

Fishing trips: $41.8 billion

Bicycling trips: $81 billion [PDF]

Rock climbing/hiking trips: $12 billion [PDF]

Treating trips and falls: $76.3 billion

Birdwatching: $26 billion [PDF]

Paying for wild birdfeed: $3 billion

Treating dog bites: $570 million

Going under the knife for aesthetic cosmetic surgery: $13.5 billion

Purchasing cosmetics: $62 billion

Getting your nails done: $7.47 billion [PDF]

Getting hammered: $223.5 billion

(According to the CDC, this includes the cost of lost workplace productivity, health care expenses, law enforcement expenses, and impaired driving accidents.)

Binging at food trucks: $2.7 billion

Treating acid indigestion: $2 billion

Eating quinoa: $1.32 billion

Chewing chewing gum: $2 billion

Chewing chewing tobacco: $5.93 billion

Buying chew toys: $32 million

Going back to school: $75.8 billion

Prepping for standardized tests: $12 billion

Treating stress-related illnesses: $300 billion

Purchasing fake degrees: ~$100 million

(More than 100,000 fake degrees are sold each year in the U.S., at approximately $1000 a pop.)

Giving graduation gifts: $5.4 billion

Playing Fantasy Football: $4.6 billion

Watching the Patriots-Falcons Super Bowl: $14.1 billion

Eating pizza: $32 billion

Eating supermarket hot dogs: $2.4 billion

Treating Ischemic heart disease: $88.1 billion

Buying heartfelt Valentine’s Day jewelry: $4.3 billion

Taking a risk with lottery tickets: $80.55 billion

Taking a risk with online dating: $2 billion

Buying flowers: $31.3 billion

Freshening up with mouthwashes, gargles, and rinses: $1.8 billion

Going to the bar: $20 billion [PDF]

Hitting the nightclub: $1.9 billion

Popping Himalayan Viagra: $5 to 11 billion

(Yarsagumba, or caterpillar fungus, is a parasitic fungus made by ghost moth larvae. This “Himalayan Viagra” has been considered an aphrodisiac for millennia. Numbers reflect global sales.)

Tuning the radio to smooth jazz: $190 million

Pregnancy: $55.6 billion

Last time we did this, a handful of readers expressed interest in seeing these numbers arranged in ascending order. If you’re drooling to see these numbers neatly ordered, a sheet is linked here. Enjoy!

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