If we look back at the proportion of cash relative to the economy over the past century, we can see how how it increases at the start of economic upcycles. Last year, in 2020, despite the fear many people had over the initial narrative that money can spread covid and contrary to what many of us might expect, the total value of currency in circulation in the US actually increased.

Infact the total value of currency in circulation reached over $2 trillion (according to the Federal Reserve). This was an increase of 11.6% from the previous year and was the largest single-year percentage increase since World War II. Although obviously we did not have digital money back then, there have been clear cycles between the amount of cash in circulation and how the economy fares and that has continued even into this century.

In times of economic woe, they have historically coincided with an increase of currency in circulation. And as all that cash builds up, it needs somewhere to go and leads to an economic boom. This ebbing and flowing of cash act as a counterbalance to the economic pendulum as it swings between recession and growth.

We can see this cycle unfold in 1983 (9.6%) as the US was heading out of a recession, in 1991 (10.2%) after a downturn, in 2002 (9.8%) after the dot-com bubble bust and on the way out of the 2007/08 financial crisis in 2009 (also 9.8%). Now we are seeing this same indicator again this time, hinting that we could be on the way to an economic peak once more.

While historic markers are not guarantees of what happen in the future, they do show us patterns. And despite all of the chatter about how everyone is favouring virtual money over physical cash during the pandemic, it’s impossible to ignore that the levels of cash now have increased more in the past year than any of the previously mentioned economic crisis’, or any other year since 1945.

This shines a new light of the perception that digital money has taken over during the pandemic and cash has been thrown to the rubbish heap, the real narrative is out there in play and if the economy follows previous economic cycles, with the highest influx of physical cash into the US economy in a single year for over half a century, this could has all the indications that it will lead to increased spending and an economic upswing over the coming months and years.