Eighty-five percent of the dollars in circulation are in non-American pockets. There is no better confidence indicator than this.

The Federal Reserve, or just "the Fed," prints the US dollar. It physically prints it, with printing machines, using ink and paper. A one hundred dollar bill is just a piece of paper with numbers and images on it. But everyone has confidence in it. Actually, everyone has confidence in the United States of America. People prefer the US dollar as a store of value. I guess the most favorite store of value for mattress-savers is the one hundred dollar bill. The rising demand for one hundred dollar bills shows that the crisis did not harm but strengthen the confidence in the US economy. The weakness of the new electronic currency, Bitcoin (BTC), is the strength of the one hundred dollar bill. Let’s have a look at the figures together.

By the early 1990s, 50 percent of the dollars in circulation were one hundred dollar bills. The rate reached 67 percent in the first decade of the 2000s. It is 77 percent today. In addition, studies report that the amount of US dollars in circulation in the public sphere is $2,950 per person, 78 percent being one hundred dollar bills. Of these total, only 15 percent are held by Americans: 85 percent of the dollars in circulation are in non-American pockets. There is no better confidence indicator than this. The crisis erupted in the US, at the center of the world. The world realized that the US-dollar based financial system had sewage water in it. The confidence in the US dollar-denominated assets and thus in American banks was shaken. A couple of banks went bankrupt. Since the beginning of the crisis, the total value of one hundred dollar bills in circulation has increased by 52 percent. The share of the one hundred bills in total dollar volume in circulation also has grown. As the confidence in the US has been shaken, the demand for one hundred dollar bills has increased. Figures tell us so. As the world becomes less secure, the demand for one hundred dollar bills grows. Yet, people cannot help wondering how the demand for American bills can grow if the US economy is ailing. If you ask me, the world has been changing not rapidly but bit by bit. Uncle Karl would say “all that is solid melts into air.” But the one hundred dollar bill is the last to melt.

Let me exemplify this. Put yourself in the shoes of a pensioner from Southern Cyprus. You are living your life on a charming, but divided island. Your savings are in a bank. The banks on the island have grown into giants recently. When Beirut sank, Cyprus banks attracted transactions. Yugoslavia disintegrated, it worked well for you. Finally, when the Soviet Union collapsed, Southern Cyprus was exhilarated. It seems that there was no need to worry. But one morning, you see that the trustworthy bank of yours is not open and you do not own some part of your deposits anymore. This is how all that is solid melts into air. You are questioning whom you can trust at times when even banks are not trustworthy. In the end, you find yourself exchanging your savings for one hundred dollar bills and stashing them under your mattress. That is the story.

It appears that the US-originated global financial crisis of 2008 has been fueling the demand for one hundred dollar bills. People have been withdrawing their savings at banks and purchasing them. The confidence in the bill is still strong in today’s world where all that is solid melts into air and the confidence in conventional institutions is shaken. No one worries about inflation. People are confident that the purchasing power of the good old one hundred dollar bill will remain more or less the same. The change in the value of Bitcoin, which is being touted as the next international currency, might freak you out. Recently, the value of a single BTC plummeted from 250 to 150 US dollars. At the beginning, one BTC equaled one US dollar. With purchasing power parity so volatile as such, the BTC does not encourage confidence as a store of value. People continue relying on one hundred dollar bills instead.

No, the US is not ailing, not as long as the confidence in one dollar bills continues.

This commentary was published in Radikal daily on 12.04.2013