The Answer is, “Rampant Inflation” Or There Are 60,000 Briefcases Stuffed With Cash in the Global Underworld!

A guest post by Benjamin Cole

Suppose you had a nation in which the amount of cash in circulation—fiat money backed by nothing—tripled in a 15-year period. Suppose that nation had $3,400 in U.S. greenbacks floating around for every resident.

As in, the typical family of four had $13k in Benjamin Franklins in the cupboards, to tidy them through the weekend.

On average, I just described the United States.

Ask any typical modern economist what would happen in said nation, and the answer would be “rampant inflation.” Now, of course, that is the monomaniacal answer that modern economists give to nearly any question, but in this case, it warrants consideration.

After all, every U.S. resident has an extra $2,100 in cash on hand compared to just 1996? And they had $1,300 laying around then?

“Ah,” say our “experts.”

Much of this growing Niagara of paper cash has leaked overseas, and no one knows how much. Some say half. Well, as a guess, it means they cannot be wrong by more than half, so it is good guess.

It is often darkly hinted that drug lords and other never-do-wells are lugging around suitcases of cash, a fact backed up by innumerable melodramatic stereotypes.

There are $600 billion worth of cash in briefcases out there?

Word on the street is that large briefcase can hold about $1 million, American c-notes. I asked a really mean-looking “courier” at the Mexican border once, and that was the answer. He also placed his hand on a bulge in his jacket. That terminated any follow-up questions, but I Googled around, and his answer actually checks out.

So, there are 60,000 briefcases of U.S. cash in circulation in the global underworld.

No wonder I can’t find my bags at the airport. The carousel is clogged with all those briefcases.

But then, academic economists are not known to be experts on the underworld, as it really is. The Fed, for its part, gets very tetchy about the subject of U.S. cash in circulation, and claims the drug lords are not hoarding all that cash as much as other academics say.

But then how much do the wing-tipped Fedsters know about submachine guns and El Chapo?

Be that as it may, prices since 1996 are up about 40 percent in the United States, not 200 percent.

There is a huge disconnect between literal money-printing, even runaway fiat money printing, and inflation. We get very little bang for our buck.

I blame El Chapo.

6 thoughts on “The Answer is, “Rampant Inflation” Or There Are 60,000 Briefcases Stuffed With Cash in the Global Underworld!

    • Mark-

      Yes…but you are deflating my balloon! (also you forgot something, keep reading).

      Another way to look at it: Nominal GDP has roughly doubled since 1996, but cash in circulation has tripled.

      The Fed suggests a lot of the increase is actually due to a technological change: The universality of ATMs. It is easy now to pull out some cash, and not write a time-consuming check…

      As someone who lived and worked in Los Angeles, I suspect a growing underground economy, ala favalas. This is actually “good news” in the sense maybe living standards are higher than thought.

      And what did Mark forget?

      We do not know how much of this cash has drifted offshore, and become a permanent part of another economy, but not the US economy.

      If it is less than before (than in 1996), then effective cash per GDP in th eUSA could be double or triple 1996 levels.

      There is some argument that this may be true, Currency controls are tougher now, in fact as of 1996.
      In April 1996 the Suspicious Activity Report (SAR) was introduced. Any transaction of more than $10,000 is automatically recorded.

      Try withdrawing $10,001 from the bank. To assemble $1 million in a briefcase, you would need a (minimum) 100 withdrawals, and then to secret the briefcase out of the country somehow.

      I suspect that thanks to Fed tightness, the economy is circumventing Fed tightness and relying more and more on cash, also to avoid teases and regulations. The velocity of cash could be ruining, we do not know.

      Thank goodness, I say.

    • Max:

      I ran a small furniture-cabinet making business in L.A. for 20 years, was also a renter and then a landlord. Cash transactions and even cash pay are commonplace in that world. FYI, when you see a bill with Benjamin Franklin on it, that is a c-note.

      Really? You have seen seen one? May I ask what line of work you are in? What region of the country? Your age?

      • I don’t get paid in cash, and ATMs only spit out $50s, so…maybe if I were traveling overseas and wanted to have a nice wad of cash, then I’d get some $100s.

        Speaking of Franklin, have you ever read this?
        “A MODEST ENQUIRY INTO THE Nature and Necessity OF A PAPER-CURRENCY”
        http://etext.lib.virginia.edu/users/brock/webdoc6.html

        It’s appropriate that Franklin is on the $100, because he not only advocated for paper money, but printed it too.

  1. Benjamin Franklin was right up there with Da Vinci—the sort of intellect makes you wonder what has happened to us modern sapiens…

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