Hi Ron,
Actually, about half of the US' $400+ Billion currency is in circulation overseas, the often quoted "free loan" to the US. The rest of the $400+ Billion is already in circulation -- the amount used for "normal" commerce.
I have read from several sources the quoted $150 Billion in stockpile, plus the plans to speed up the presses to produce another $50 Billion. I have also read that much of the stockpile is in rather large denominations -- $50 bills or higher.
So, estimate, optimistically, that perhaps three-fifths of the $200 Billion in uncirculated funds for emergency distribution is in amounts deemed "useful" to the average Joe showing up at the ATM or teller window:
$200,000,000,000 * 0.6 / 100,000,000 households = $1200/household.
In general, this amount might still be OK, especially if reliable sources indicate a manageable Y2k transition. However, this is not much of a safety margin for various potential scenarios. Spot shortages could also stress the system.
More importantly, our fractional reserve banking system does not have anywhere near the amount of liquid assets on its books to honor even $1200 per household. It's more like $800 per household, and that cleans out both the banks and the FDIC ($400 per would deplete the banks' liquid assets).
As a stop-gap, the Fed is probably contemplating extending short-term "liquidity" loans to tide the banks over, if needed. However, if the depositors choose not to return their funds to the banks, for whatever reason, within a reasonable amount of time, the system could face some very serious problems. |
