There’s a lot of talk that the U.S. is moving toward a cashless economy…at least in the sense that people are using more and more “plastic” (credit and debit cards) for transactions and that cryptocurrencies are becoming more popular. One test of this theory is to look at currency in circulation. If this measure stops growing while the economy is growing, it would be an indication that other forms of money have become more important and are serving as substitutes for currency. The graph above tells a different story: Currency in circulation is consistently growing more than the economy is. (Note: Both are nominal, not “real” inflation-adjusted measures). One caveat: U.S. dollars are also used quite a bit abroad. But dollar use abroad would have to increase much more than the U.S. economy for it to counteract a reduction in domestic currency demand. So it seems the question remains open.

How this graph was created: Search for currency in circulation and click on the series name. From the “Edit Graph” panel, open the “Add Line” tab and search for GDP. Do not select a real GDP measure! Take GDP in current prices. Change units to “Percent Change from Previous Year” and click on “Copy to All.” Finally, change the sample period to start in 1948.

Suggested by Christian Zimmermann.

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.