Currency in Circulation as a Percent of GDP
- Posted by TheArmoTrader
- on October 11th, 2011
Below you will find a custom never before seen chart of “Currency in Circulation as a percent of GDP”. I have personally calculated all the data and personally constructed the chart*. The chart starts in 1984, the year when the Federal Reserve ($FED) began tracking Currency in Circulation. Since measuring Currency in circulation by itself is erroneous and without perspective, I decided to compare it as a % of GDP. Like this, we will be able to measure how currency in circulation has really moved over the past ~30 years in comparison to the size of our economy.
What the chart tells you is (Definitions Courtesy of InvestorWords.com):
- Currency in Circulation: ”The total amount of paper currency & coins, that is held by consumers and businesses rather than by financial institutions, central banks, and the U.S. Treasury. Currency in circulation is thus the sum of currency held by the public, and is a component of a bank’s reserves.”
- GDP (Nominal): “The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports…The Nominal GDP does not account for inflation.”
Currency in Circulation as a % of GDP
UPDATE: After doing some deeper digging, I found that FRED has data of Currency in Circulation dating back to 1914, but I could only find usable and comparable GDP data from 1929. So the chart below will show Currency in Circulation as a % of GDP since 1929. As you can see, we had some wild gyrations early on, but stabilized in the late 1960s. This chart is measured annually, compared to the chart below which is measured quarterly (and only from 1984).
To Download the data above (in Excel format), click here.
(I apologize for the clumping in the Years on the X axis. The charting data I use does not allow me to edit font size.)
As you can see below, after being relatively flat in the 1980s, we have been in a nice uptrend ever since we started moving up in the early 1990s. The only real contraction we ever saw was from the height of the early 2000s recession (2002) to the popping of the housing bubble in 2008. Since 2009, we have seen a significant move up.
While the GDP data for Q3 2011 is not out yet, I estimated 1% growth in our GDP from Q2 (so the last quarter on the chart is an estimate). With that estimate, we are seeing currency in circulation as a % of GDP at ~6.815%.
Update: With Q3 2011 GDP officially out (non-revised) on October 27, this officially puts Currency in Circulation as a % of GDP for the Q3 at 6.801%.
(Update not reflected on chart, although difference is visually negligible).
To put this chart into a better perspective, lets take a look at the US Dollar in the same time period.
US Dollar vs Major Currencies (1984-2011)
Caveat (*)= Being Human, it is possible that I miscalculated data somewhere. But you can be assured I doubled checked the data. If you do find an error, please let me know.
Shout-out to @PrinceBhojwaniwho helped me with this.
Source for data: FRED
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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