A Lot of Paper and a Little Metal

Here is a quick once over of the paper bills and metal coins that make up vault cash.

• Federal Reserve Notes: These are issued under the authority of the Federal Reserve System. They come in denominations of $1, $5, $10, $20, $50, and $100. A few bills carrying a $2 denomination are encountered from time to time, but they are not as widely used as the others. Denominations larger than $100 ($500, $1,000, $5,000, and $10,000) were also available once upon a time, but they too are seldom seen beyond the collections of numismatics.


• Treasury Coins: These are issued under the authority of the U.S. Department of the Treasury. They come in denominations of one cent, five cents, ten cents, twenty-five cents, fifty cents, and one dollar. The coins were once made from pure metal (copper, nickel, and silver), with relative sizes reflecting the value of the metal content. However, pure metals gave way to less expensive metal alloys as coins made the transition from commodity money to fiat money.

Out of Circulation

Vault cash, in contrast, is part of the economy's stock of currency that is out of circulation and stored by the banking system. Much like retail stores keep inventories of consumer goods awaiting purchase by the public, banks keep inventories of cash awaiting withdrawal by the public.

While vault cash is NOT part of the M1 money supply, it is included in what is termed high-powered money or monetary base. The monetary base includes the currency held by the nonbank public, vault cash held by banks, and Federal Reserve deposits of the banks. These are the three monetary components over which the Federal Reserve System has relatively complete control and is often used as a guide for monetary policy.

The Other Reserve