This graph shows the year-to-year percentage change in the currency in circulation in the United States. Until 1950, we notice wide swings; after that, it is a much more stable path. The one exception was a large increase and then a decrease of currency that is associated with the year 2000 and the related “Y2K” fears. Even the years of higher inflation in 1974-75 and 1979-81 are not noticeable compared with the pre-war fluctuations.
If we were to put this graph in absolute numbers instead of percentage change, one would have the impression that currency in circulation is exploding. This is due to the effect of compounded interest. Even with very low growth (or interest) rates, the data will always appear to show acceleration, even if it is not the case. To view this, go to the graph page, click on “edit series,” and change the units to “Billions of Dollars”.
How this graph was created: Select currency in circulation (the monthly series has older data), and transform the series to “Percent Change from Year Ago.”
Suggested by Christian Zimmermann.
View on FRED, series used in this post: