CLOSE
iStock
iStock

The Mystery of the Missing Money

iStock
iStock

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.

nextArticle.image_alt|e
iStock
arrow
Live Smarter
A New Law Could Require Hospitals to Post Their Standard Prices Online
iStock
iStock

Try shopping around for affordable hospital care like you would for a car or a house, and you'll surely hit a wall. Hospital bills are a huge expense in America, but the prices for specific services are often obscure until patients check out. Now, PBS reports that Medicare may soon require hospitals to post their standard prices and share medical records online.

Hospitals are already required to disclose their prices to the public, but actually tracking down a number can suck up more time and effort than customers have to invest. While making a video for Vox, it took reporter Johnny Harris two weeks and 30 phone calls to get an estimate for how much his wife's delivery of their child would cost. Under the new rules, such prices would be made clearly available on the internet so that third-party app developers could access them.

The change wouldn't automatically make shopping for hospitals as easy as comparing airfare prices. Patients would still be responsible for getting in touch with their health insurance provider to see how much of a hospital's listed price is covered and how much of it falls on them. Even then, the numbers patients get will likely be more of an estimate than a hard figure.

In addition to making pricing more transparent to customers, the proposed rule aims to make personal medical records more accessible as well. The hospitals that make the effort to present this information clearly, possibly by organizing bills from multiple providers into a single app, would receive benefits from Medicare.

The U.S. has some of the most expensive healthcare in the world: In 2016, Americans collectively spent $3.4 trillion on medical costs. For many people, high medical bills are unavoidable, but if the proposed rule goes into effect (most likely in 2019), it could at least make them less of a surprise.

[h/t PBS]

nextArticle.image_alt|e
iStock
arrow
Live Smarter
GoPro Will Let You Trade in Your Old Digital Camera for One of Their Cool New Ones
iStock
iStock

If your camera is aging, GoPro just gave you a great incentive to trade it in for a new model. The company has launched a buyback program that discounts its latest models if you send in your old camera, according to TechCrunch.

If you participate in the GoPro TradeUp program, the company will lop $50 off the price of the new GoPro HERO6 Black and $100 off the price of the Fusion, both released in late 2017. The offer applies to any digital camera—GoPro or not. Now might be a good time to offload that digital point-and-shoot you’ve been sitting on. (It does have to have an original retail value of at least $100.)

GoPro tried a similar initiative in 2017, giving customers 60 days to send in older GoPro models and get a discount on new models. Almost 12,000 customers answered the call. Now, the company is bringing it back with no end date, and the program will now accept any digital camera, whether GoPro-made it or not. “Dented, dinged, destroyed—no problem, we’ll take it,” the site promises.

If you’re already looking to get a new camera and want to dispose of your old one properly, this is a good way to do it. According to the company, “returned cameras will be recycled responsibly via zero landfill and recycling methods appropriate to material type.”

When you order one of the two available GoPro models through the TradeUp program, the company will direct you to dust off your old camera and send it in, with shipping costs covered. Once GoPro receives your old camera, it will send you the discounted new one.

With the discounts, a HERO6 Black would cost $350, and the 360°-shooting Fusion would cost $600.

[h/t TechCrunch]

SECTIONS

arrow
LIVE SMARTER
More from mental floss studios