Y2K and Cash

The Federal Reserve has already ordered an additional $50 billion from the Bureau of Printing and Engraving to meet an expected surge in demand later this year, when people decide to hold extra cash as a precaution against Y2K related computer breakdowns.

Storing extra currency in bank vaults around the country is nothing new for the Fed, which has often taken similar steps when special events such as the Olympics or a World’s Fair were held in the US.

All that extra money won’t lead to higher inflation because the Fed isn’t actually increasing the money supply.   It’s just bracing for the possibility that some consumers will shift money from accounts to "in hand".

But you won’t find Fed chairman Alan Greenspan standing in line at an ATM on New Years’s Eve.  "Walking around with a lot of $100 bills is not the safest way to keep your money," he told Senate Banking Committee earlier this year.  "The most sensible thing is to leave it where it is."

Source: The months ahead: Y2K watch. (1999, June).  Kiplinger’s.