Circulation (currency)

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In monetary economics, circulation is the continuing use of individual units of a currency for transactions. Thus currency in circulation is the total value of currency (coins and paper currency) that has ever been issued minus the amount that has been removed from the economy by the central bank. More broadly, money in circulation is the total money supply of a country, which can be defined in various ways always including currency and also including some types of bank deposits.

Standard money is the basic currency circulating within a monetary system. It has legal recognition for prices and settlement.[1] According to Karl Marx circulation is a process which is established by capital and formed from wealth.[2]

The amount of money in circulation varies according to a number of factors. For example, there is more demand at Christmas time when commercial activity is high. Notes and coins stored in warehouses are ordered by banks and sent to them so they may increase supply.[3]

Gold coins are the traditional kind of coin placed into circulation. Some coins enter circulation before a die defect in their design is discovered and they are removed. If a coin is in circulation for a short period of time it is more likely to be of interest to coin collectors.

History[edit]

The American colonies or states governments were able to circulate bills of credit. These state issued and backed money instruments were constitutionally prohibited.[4]

Total currency in circulation[edit]

In 1990, total currency in circulation in the world passed one trillion USD. After 12 years, in 2002 this figure was two trillion USD, and in 2008 it had increased to four trillion USD, broken down by country as follows:[5]

  • Eurozone – 1035.2 billion USD, 24.30% of world total
  • United States – 850.7 billion USD, 19.97%
  • Japan – 762.4 billion USD, 17.90%
  • China – 492.3 billion USD, 11.56%
  • India – 140.3 billion USD, 3.29%
  • Russia – 110.8 billion USD, 2.60%
  • UK – 87.5 billion USD, 2.05%
  • Canada – 43.8 billion USD, 1.03%
  • Switzerland – 40.3 billion USD, 0.95%
  • Poland – 37.7 billion USD, 0.89%
  • Brazil – 37.3 billion USD, 0.88%
  • Mexico – 34.3 billion USD, 0.81%
  • Australia – 32.4 billion USD, 0.76%
  • Pakistan – 17.63 billion USD, 0.42[6]
  • Other countries – 537.4 billion USD, 12.89%

After its useful life has expired banknotes are taken out of circulation and either recycled or destroyed by shredding.[7] In Australia, for example, millions of dollars worth of banknotes are taken out of circulation and destroyed every hour.[8]

See also[edit]

References[edit]

  1. ^ Peng, Xingyun (2015). Financial Theory: Perspectives from China. World Scientific. p. 12. ISBN 9781938134333. Retrieved 14 January 2017. 
  2. ^ Marx, Karl (2007). Capital: A Critique of Political Economy - The Process of Capitalist Production. Cosimo, Inc. p. 386. ISBN 9781605200064. Retrieved 14 January 2017. 
  3. ^ Welch, Patrick J.; Gerry F. Welch (2016). Economics: Theory and Practice. John Wiley & Sons. p. 190. ISBN 1118949730. Retrieved 14 January 2017. 
  4. ^ Solomon, Lewis D. (1996). Rethinking Our Centralized Monetary System: The Case for a System of Local Currencies. Greenwood Publishing Group. p. 101. ISBN 9780275953768. Retrieved 14 January 2017. 
  5. ^ Mike Hewitt (25 June 2009). Fiat Currency in Circulation, How Much Money is There?. The Market Oracle.
  6. ^ Rs 1,763.54b currency notes in circulation. The Nation. Nawaiwaqt Group Of Newspapers.
  7. ^ Wolman, David (2013). The End of Money: Counterfeiters, Preachers, Techies, Dreamers--and the Coming Cashless Society. Da Capo Press. p. 44. ISBN 9780306822698. Retrieved 22 January 2017. 
  8. ^ Jason Murphy (15 September 2015). "Why we shred $1 million in cash every hour". news.com.au. News Limited. Retrieved 22 January 2017.