Velocity Of Money – Will Paper Currency Soon Become Outdated?

The Velocity Of A $1 Bill

The average $1 bill tends to circulate for about four to 15 years, according to the Federal Reserve. And U.S. coins last even longer: about 25 years, the Fed says. In that time, basically, every bill will have touched someone at one point who is sick or has come in contact with drugs.

This pathogenic retinue likely extends beyond a few errant dollars that made their way to scientific labs. U.S. Air Force researchers published findings back in 2002 that concluded most $1 bills—94 percent of 68 tested dollar notes—were harboring bacteria, including some which could cause pneumonia or other serious infections.

If the average bill lasts about four to 15 years, we are dealing with a wide margin here, but for the sake of saving time, let’s say the average bill lasts about ten years.

The US population is about 320 million (again, just an estimate), and there are approximately 12 billion $1 bills in circulation as of March 2017, as calculated by the US Federal Reserve System.

Let’s take 12 billion and divide it by the US population, we get 37.5 Multiply that by 365 we get 13,687. Your one dollar bill has come in contact with almost fourteen thousand people each year.

This raises a bit of skepticism towards the efficiency of paper currency.

Is Paper Currency Outdated?

Some may argue that physical money (bills and coins) is rapidly becoming obsolete as we speak.

The vast majority of USD, Euro, Yen, and Yuan only exist online now, and the physical money & coins are something that both governments and the users want to do away with but have been technically impossible to do so until now.

The total amount of money in the world is estimated to be around 60 trillion US dollars – includes cash, various types of deposits, money markets, funds, etc. Assets that can be fairly easy liquidated and spent on something else. ( for the purpose of this question we won’t actually count the value of other assets and forms of wealth)

Total cash is estimated at about 5 trillion dollars

5 / (60 / 100%) = 8.3%

Approximately 92% of all money is now digital, yet paper currency remains a very feasible medium of exchange.

Now we have smartphones and smartwatches and smart cards and Bitcoin hardware wallets and brain wallets and all kinds of gadgets that can interface with buyers and sellers for us, online and in person, and do so redundantly. The tech is still rough on a few but there’s more promise, especially in bitcoin, than anyone even knows about here.

Consider too that we are moving more and more online to do things there that just 5 or 10 years ago did exclusively offline. Watching movies, eating, playing games, even working, we just keep finding more things to do online and therefore we are basically moving into a new phase of human existence where we slowly become infused into the internet.

However, Although there will always be a non-computerized, non-surveilled, non-monitored, physical manifestation of value that can be used for trade there will also always be illegal exchanges that are too risky, or too small, or even too low tech to be handled electronically, even by bitcoin.

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David McDonald

David McDonald

David is a 19-year-old Canadian student currently attending the University of Guelph. He currently studies Public Management and economics with hopes of one day becoming an accomplished journalist. David enjoys reporting on global events and actively try to make a difference in the world.
David McDonald

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