“Effects of the Financial Crisis on Currency Demand” 3 rd International Conference Moscow,...

“Effects of the Financial Crisis on Currency Demand”3rd International Conference

Moscow, RussiaNovember 17-18, 2009

Michael J. Lambert

Assistant Director

Board of Governors of the Federal Reserve System

2

Outline

• General Trends in Currency in Circulation

• General Economic Indicators

• Changes in Demand for U.S. Currency

• Current Conditions

• Conclusion

Currency in Circulation:Value and Percent Change

1960 - 2008

3Source: Board of Governors H.4.1 Report

2008: 7.7%

Number of Banknotes in Circulation:1960 - 2008

4Source: U.S. Treasury Currency and Coin Report

Value of Currency in Circulation: Growth Rate Comparison

5* Data through August 2008

General Economic Indicators: Gross Domestic Product

6Source: Bureau of Economic Analysis

General Economic Indicators: Prime Interest Rate

7Source: Board of Governors

General Economic Indicators: Unemployment Rate

8Source: Bureau of Labor Statistics

General Economic Indicators: Personal Saving Rate

9Source: Bureau of Economic Analysis

General Economic Indicators: Consumer Confidence

10Source: Survey Research Center: University of Michigan

Value of Currency in Circulation:2004 - 2009

11Source: Board of Governors H.4.1 Report

Dec. 2004:$720

Value of Currency in Circulation:2005 - 2009

12Source: Board of Governors H.4.1 Report

Banknotes in Circulation: Type of Use

13Source: U.S. Treasury Currency and Coin Report

Value of Currency in Circulation:Transactional Denominations

14Source: U.S. Treasury Currency and Coin Report

Value of Currency in Circulation:Store of Value Denominations

15Source: U.S. Treasury Currency and Coin Report

Currency in Circulation:Value by Week 2005 - 2009

16

Payments to Circulation:2005 - 2009

17Source: Federal Reserve System National Cash Data Warehouse

Net Payments to Circulation:2006 - 2009

18Source: Federal Reserve System National Cash Data Warehouse

Domestic Vault Cash

19

BEP $100 Note Production

20

Value of Currency in Circulation: Growth Rate Comparison

21* Data through September 2009

0.8% Growth through August 2008

Conclusions

• Currency in circulation continues to grow.– Moderation began in the 2000s.

• Economic and political uncertainties continue to drive demand.– Recent financial instability indicates the broad effect

of the global crisis and the demand for $100 notes.

• Electronic payments likely having effect on growth rates.– Debit card growth exceeds the decline in

check usage.22