Where is the U.S. Currency?

About $450 billion or two-thirds of all U.S. currency notes are held outside the United States according to a 2006 U.S. Treasury report. This effectively amounts to an interest-free loan for the United States as it has simply exchanged at some point in the past ink-stained paper for $450 billion worth of goods and services. To boot, the purchasing power of the dollars has eroded making the eventual repayment of these interest-free loans even easier. Of course, if the dollars are never returned to the United States then it is an even better deal for the United States. This is just one of the perks to having the main reserve currency of the world.

So which countries in the world have been so generous to the United States? Here is a table from the Treasury report that accounts by country for about $250 billion of the total U.S. currency notes held abroad.

Unsurprisingly, most of the currency is being held by emerging and developing economies. Presumably all of these countries at some point in the past had some form of monetary instability and, as a result, their residents are now demanding a relatively safe alternative form of money, the dollar. So what denominations are these folks holding? Linda Goldberg has put together a nice chart that answers this question:

It is interesting to see the increasing demand for $100 bills and the decreasing demand for $50 and $20 bills. Maybe the dollars are being held more as a store of value than a medium of exchange and, thus, the larger bills are more in demand.

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