Exploring the Relationship Between $100 Bills in Circulation and Real Inflation

According to the government’s Bureau of Labor Statistics, inflation has declined significantly since it peaked over 9%in 2022. According to the February report from the US Bureau of Labor Statistics the Consumer Price Index for All Urban Consumers rose 3.2 percent over the last 12 months, not seasonally adjusted. While this seems really good statistically, I think we can all acknowledge that everything costs more than it did 5 years ago. My son said that he just went to Five Guys for lunch and spent over $22 for a burger, fries and drink.

I recently came across a chart which I think exemplifies what we all are feeling. The chart compared the number of $100 bills in circulation compared to the number of $1 bills in circulation over the past 15 years. Could the staggering increase in $100 bills in circulation be an indicator of inflation?

While inflation can indirectly impact the number of $100 bills in circulation, it's not a direct causal relationship. Inflation affects the overall demand for cash and the economy's need for higher denominations, which can influence the circulation of $100 bills. When inflation occurs, the purchasing power of a dollar decreases, and people may prefer to hold larger denominations, such as $100 bills to be sure that they have enough cash in their purse or wallet for ordinary expenses or gas at the pump.  The increased demand for $100 bills can lead to more of them being in circulation.

The number of $100 bills in circulation has increased significantly over the past 15 years compared to $1 bills. The growth in the number of $100 bills has outpaced the growth of $1 bills, largely due to several factors, including the increasing global demand for US currency, hoarding of $100 bills as a store of value, and their use in illegal activities, not just inflation.

While I don't have the exact figures for the past 20 years, this chart can give us a good estimate. As of 2022, there were approximately 19 billion $100 bills in circulation, compared to around 14.3 billion $1 bills. This is a notable shift compared to earlier years. For example, in 2006, there were about 5.5 billion $100 bills in circulation, while the number of $1 bills was around 8.2 billion.

The increase in the number of $100 bills reflects changes in how people use and hold cash, with larger denominations becoming more popular for various reasons. However, the exact figures for each year over the past 20 years would require detailed historical data from the Federal Reserve.

Overall, while inflation can play a role in the circulation of $100 bills, it is just one of many factors that can influence the demand for and circulation of higher denomination currencies.

We will continue to keep an eye on the forces affecting our economy and your investments, even something as unusual as comparing the number of $100 bills to the number of $1 bills in circulation. Thank you for the trust and confidence that you have placed in me and my team.