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Why Ben Franklin Is The World's Banker


Now it's a rare thing for Americans to get a glimpse of Ben Franklin's face on a hundred dollar bill. Even if they have a hundred bucks most people do not carry a hundred dollar bill in their wallets. Many stores don't even accept bills that large because they fear counterfeits. So here's a surprise contained in a recent report from the Federal Reserve: Three-quarters of all American currency in circulation is in the form of hundreds.

Much of the $100 bill supply ends up overseas where many people preserve their savings in a stack of hundreds, their own personal branch of the Bank of Franklin.

NPR's Jim Zarroli has today's Business Bottom Line.

JIM ZARROLI, BYLINE: Colleen Dwyer of St. Louis hardly ever uses cash. She pays for just about everything with her debit and credit cards.

COLLEEN DWYER: Can't explain it. I just can tell you that if I have cash, I spend it. And if it's on my debit card, it's not - I don't spend it as freely.

ZARROLI: So when do you use cash?

DWYER: Very rarely.

ZARROLI: With more and more people using plastic for routine purchases, it can sometimes seem like cash is becoming obsolete. But Ruth Judson, who's been an economist at the Federal Reserve for nearly two decades says that's not the case.

RUTH JUDSON: I've been hearing that cash is dying since I started working on this topic, which was pretty much about a month after I arrived at the Fed. And it hasn't gone away.

ZARROLI: Judson is the author of a report that says the amount of U.S. cash in circulation has actually grown faster than the economy as a whole. And she says most of it ends up overseas. Foreigners love to hold dollars, actual physical dollars, and they hold more of them than any other currency.

JUDSON: There are a lot of reasons that people outside the United States use dollars. They use it for tourism. They use it for trade. And they use it as a store of value when there aren't other assets that might work.

ZARROLI: And Judson says the overseas demand for dollars tends to rise whenever there's a financial crisis. It went up during the economic turmoil of the late '90s, fell back in the 2000s, and soared again after the 2008 financial crisis. Judson says people in other countries want dollars when they don't trust their own currencies or banks.

JUDSON: They might think, OK, well, I can hold cash. Well, you might not want to hold your own country's cash if you think inflation is a big risk. And so, they turn to another asset that they find familiar and liquid and available. And in many cases that's dollars.

ZARROLI: Judson says some of the places that absorb the most dollars are the countries of the former Soviet Union and Argentina. I spoke with Victoria who is an accountant outside Buenos Aires. She says she doesn't want her last name used because she doesn't want to attract the attention of the government, which restricts dollar holdings by citizens.

Victoria says when Argentines want to save money they almost always do so in dollars, even if they have to acquire them on the black market.

VICTORIA: For the last 30 years, if you want something that really keeps its value it's the dollar. And the people know that know that, know that the dollar - although now it's expensive - they know by next year it will be even more. So they prefer to buy some dollars, whatever they get, and put it under their cushion in their house.

ZARROLI: Victoria says people keep dollars in their safe deposit boxes or even hidden around the house. And she says the money is almost always in $100 bills.

VICTORIA: You would have some change when you come back from a trip or things like that. But for savings, what's more common here is the hundred dollar bill.

ZARROLI: It might seem like this thirst for U.S. currency overseas would put some upward pressure on the value of the dollar and make American exports more expensive. But any impact it has is small. Judson says most of the money crossing international borders everyday is not in cash. So the flow of cash moving around the world is dwarfed by other factors.

But the fact that so many foreigners see U.S. currency as a safe investment, says something about how credible the dollar remains in much of the world.

Jim Zarroli, NPR News, New York.


INSKEEP: It's MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.