Wednesday, January 5, 2011

A Hypothetical US Bank Run Exercise: How Much Would You Get?

According to The Federal Reserve Bank of New York, here, only about one third of US currency in circulation is thought to be held within the United States:

In April 2008, M1 was approximately $1.4 trillion, more than half of which consisted of currency. While as much as two-thirds of U.S. currency in circulation may be held outside the United States, all currency held by the public is included in the money supply because it can be spent on goods and services in the U.S. economy.

Current observations by The Federal Reserve Bank of St. Louis, here, show that currency in circulation as of the end of December 2010 came to about $983.7 billion.

So let's ask hypothetically, just for the mental exercise, that if we had a bank run in America and we decided we would ration the available cash in equal shares to the adult population of, say, 228 million people, assuming of course each such person had some digits on a bank statement warranting cash claims, how much maximum could each claimant expect to get under such circumstances?

$1,438 each.