Ruth Judson on Chasing Dollars Around the World

Ruth Judson is a monetary economist, economic historian, and veteran of the Federal Reserve Board of Governors. In Ruth’s first appearance on the show she discusses her career at the Fed, field trips tracking counterfeit dollars around the global, how we know how much currency is held overseas, why money doesn’t matter anymore, the problem with cashless societies, how to understand TIC data, the promise of dollar backed stablecoins, and much more. 

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This episode was recorded on March 4th, 2026

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected]. 

David Beckworth: Welcome to Macro Musings, where each week we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckworth, a senior research fellow with the Mercatus Center at George Mason University, and I’m glad you decided to join us. 

Our guest today is Ruth Judson. Ruth is a monetary economist, economic historian, tracker of global capital flows, and a longtime veteran of the Federal Reserve Board of Governors. She joins us today to talk about all things dollars, from physical cash to digital dollars. Ruth, welcome to the program.

Ruth Judson: Thank you.

Beckworth: It’s great to have you on, and I came across your research some time ago when I was looking up the demand for currency. Lo and behold, your name just popped up, and you have a lot of work on this, and we’ll talk about that today. You’ve done so much more. You’ve written a lot on global capital flows, the TIC data. You’ve written on safe assets, written on money. I just learned that you were the one who kept track of the data on monetary aggregates at the Federal Reserve, the H.4.1, and the balance sheet, and all the other good stuff. You’ve seen it all at the Fed, haven’t you?

Ruth at the Fed

Judson: I wouldn’t say I’ve seen it all, but I’ve seen a lot. Honestly, when you start working on cash, it’s connected to so many things. It’s just everywhere. It was never my full-time job. It was largely like my work hobby. Every time I changed jobs in some way or another, I would think, “Oh, this whole cash thing, it’s over,” then, lo and behold, there it would be. It just followed me like a puppy through my whole career.

Beckworth: Tell us more about what you did at the Fed, all your different roles you had there.

Judson: I started at the Fed in 1994, and I was in Monetary Affairs. I was in a group that, as you mentioned, tracked the monetary aggregates and maintained the models of money demand, and tracked the data and models for deposit rates also. I was introduced to cash at that point because—true story—they had just started this project, and they needed an economist to go to Belarus in December. I was not yet at the Fed. One of my colleagues, an MIT classmate, said, “How about that woman who’s coming soon? She said she likes to travel and she speaks Russian. She can go to Minsk in December.” There you have it.

Beckworth: Okay. That Russian undergraduate education paid off?

Judson: I guess so. I was in that group for a while, and then they shifted the monetary aggregates work and the people from one group to another, so I moved with the work. That group also did the open market operations. Daily open market operations is very much a matter of taste. Some people can’t stand it, don’t want to have anything to do with it, and some people find it addictive. I found it vaguely addictive because you had to come up with an opinion every day about what you thought the size of the operation should be.

Then the New York Fed was doing the same exercise. Then you would have to come to consensus, which usually meant they did mostly what they wanted to do. That meant that every day you also had an opinion about what the outcome in the Fed funds market would be, and the next day you would come in and find out. To me, that was addictive. I really liked it.

Beckworth: Very interesting.

Judson: It was really interesting. I would say I started developing my firm belief in automation for all things in that setting because it was daily, and there was a lot of information coming in. You just had to have some systematic way of getting a handle on it every day.

I was in Monetary Affairs until 2011. Of course, we stopped doing fine-tuning daily open market operations in 2008-ish. In 2011, I moved to International Finance. I was very, very lucky in that just at the time when I was moving over there, which was, of course, to be a one-year visit, they were introducing a new data collection form. They were like, “We need somebody to deal with this form. Can you do that?” I was like, “It’s data. It’s monthly. That’s so easy. It’s not even daily. It’s monthly. What a deal.”

Beckworth: “How hard could it be?”

Judson: That was quite fun. The people I worked with there, including my co-author for many papers, Carol Bertaut, were extremely generous in sharing their knowledge with me because, believe me, I knew nothing about the TIC data when I arrived, nothing. Carol, in particular, was very generous with her time. We got a handle on this new data flow, and it was pretty cool. They invited me to stay after I’d only been there a short time, and I did.

After a few years, I took over running the rest of the TIC apparatus as well. I did that until about two years ago and then I decided it was time to hand it off. I wanted to have a little more space to do other things, and I could see that I was going to retire soon. I thought it was not optimal for me to be running the TIC thing and just walk out the door while still running it. I was just like, that is not organizationally optimal. It was really great because I handed it off, and I did a rotation with the cash group, and that was really fun. Then I had a little more time to work on digital payments—stablecoin, CBDC, whatever the flavor of the week is.

Beckworth: Again, you’ve done it all. It seems like you’ve worked with TIC data. For our listeners, TIC is Treasury—?

Judson: Treasury International Capital. It’s cross-border banking and securities positions and transactions. What I like to tell people is that the factoid most people have heard that comes directly out of the TIC data is how many foreigners are holding Treasuries and who they are. The TIC system collects data not only on Treasuries, but also on agencies, corporate bonds, and US equities, and then also collects the flip side of that, which is what US residents hold of foreign stocks and bonds.

Then there’s a whole other section of the TIC data collection system that collects banking data, and then there’s derivatives data collection. The banking data, we have other sources for the banking data as well, whereas for securities, TIC is all there is. We tend to focus more heavily on the securities and especially heavily on the Treasuries because the Treasury owns the data, and that’s what they care about.

Beckworth: You’ve worked with a lot of interesting data, TIC data. You also have tracked closely currency held abroad. Now, does the TIC data go into the formation of the US financial accounts which means the flow of funds—

Judson: It does.

Beckworth: Okay. I want to come back to that in a minute when we talk about currency, how reliable that is. With the TIC data, you often hear stories about who holds Treasuries. Maybe some countries are selling their data. I also hear that sometimes the TIC data doesn’t tell you everything. They might be holding it somewhere offshore or some other location. What can you tell us about that?

Judson: Right. The way the TIC data collection system works, the Treasury, or we, with the authority delegated to us from the Treasury, can only collect from US entities. We will collect data from US custodians, and they will say, “Yes, we’re holding securities in custody for entity X in Belgium,” or whatever. They can’t go any further than that.

The classic example we use here is that Euroclear is a huge securities depository in Belgium. They hold all types of securities, but in particular, Treasuries on behalf of many customers from many countries, but all we see in the TIC data is Belgium. In particular, all we see is that it’s Belgium and that it’s a private, as opposed to official, holding, even though we strongly suspect that there are many foreign official investors who are custodying their securities in Belgium. We don’t know. We’ve never been able to see beyond that step.

Currency

Beckworth: Let’s go on to currency. We may come back to TIC a little bit later. Talking about money because you started in the Monetary Affairs Division, you’re working on monetary aggregates. There’s a time where money mattered. I think it still does, at least theoretically, but in practice, it’s not used to guide monetary policy.

Judson: That’s right.

Beckworth: There are still some monetarists out there. I have a good friend, Peter Ireland, Josh Hendrickson, former podcast guests, and they use things like monetary Divisia. I have my own theory for why money isn’t useful anymore, and I’ll just quickly run it by you. I think it’s an identification issue. When the Fed’s doing its job—and of course it uses interest rates—it’s effectively stabilizing prices. The equivalent thing could be said, it’s offsetting money demand shocks from a money perspective. If it’s offsetting money demand shocks, you’re not going to see a pattern between money and the price level.

If the Fed’s doing its job, you’re going to lose all correlation between some instrument and what you’re trying to control. I think there’s a relationship there, and we can talk about maybe other things more fundamental than the money itself, something else is driving money, but monetary policy, modern age, we don’t use monetary aggregates anymore.

Judson: I think the year I arrived at the Fed was the year that the Fed started announcing the interest rate target, saying out loud, “Here is our target.” My entire time at the Fed, we’ve been very interest-rate-focused. We maintained the money models. I don’t know that we even maintain them anymore. They may be running in the background, but certainly nobody is developing new money demand models at the Fed that I know of, and I think I would know.

The publication of the monetary aggregates themselves dialed back from weekly to monthly a few years back. Just significant deemphasis of the monetary aggregates across the board.

Beckworth: I remember they used to have M3, and then it went down to M2.

Judson: No, I remember when M3 was discontinued.

Beckworth: Oh, yes?

Judson: Yes. My input was, “Okay, you’d better be really sure that you don’t want it, or that you’re never going to want it, or you’d better think ahead. Suppose 10 years down the pike, you want it. Are you going to be able to reconstitute it?” I was assured that it would be possible. Now, in the event we haven’t wanted it.

Beckworth: Again, I think it’s useful. Again, I would suggest it’s useful when you’re outside of stable times. In the pandemic, we saw monetary aggregates grow rapidly. Just another crosscheck, even if you’re not targeting it. You mentioned M3. I think it’s the CFC, Center for Financial Stability in New York. They keep track of these Divisia measures, and they go M4, these broad measures, institutional money.

It’s interesting, if you look at those during the Great Financial Crisis, they actually see big contractions in them because institutional money was crashing. If you define money broadly enough, but it’s only in those interesting moments, maybe interesting is too nice of a word there, but challenging moments that you see these monetary aggregates telling you something. When it’s stable, it’s like, how useful is it? Let’s move on from monetary aggregates to your bread and butter, currency, your specialty.

Judson: I call it my work hobby because never, ever was it my full-time job.

Beckworth: Oh, really?

Judson: Yes.

Beckworth: You were the in-house expert on it?

Judson: I kind of was. We have an entire operations group that is in charge of the care and feeding of the banknote order and the currency education. Those people are great. That’s the group I got to visit after I got done with doing TIC all the time. They’re absolutely great. They sit in our reserve bank operations area.

Then on the economic division side, it’s the Monetary Affairs group, the same people who do the rest of the monetary aggregates who, in principle, are in charge of tracking currency. For me, really, it is just a hobby. The problem is I’m a data squirrel, and so I’m on all these mailing lists for monthly data dumps. I’ve made sure I stay on those lists. When COVID hit, I was the only one who knew where all the bodies were buried. I remember sending an email over to Monetary Affairs saying, “Okay, I can do this. I need this, this, this and this. I have this, this, and this, but not this. You guys have this. This person has that.”

Beckworth: Currency did spike during COVID.

Judson: Oh, my gosh, yes.

Beckworth: Let’s come back to that. Before we do that, though, maybe walk us through the very basics. How is currency issued in the US? Who controls it? Maybe the institutional apparatus supporting currency in the US.

Judson: We supply currency on demand. You can get currency from a reserve bank if you are a member bank, if you have an account at the Fed. That would be banks. Banks will decide that they need to stock their ATMs or stock their teller windows or whatever. They will put an order in to their local reserve bank. The currency is supplied on demand and free of charge. Their account is debited. The bank will have to send the armored carrier there and pick it up and make all those arrangements.

I think at various points in time there have been some incentives provided to not have banks bring in a bunch of dirty currency and then the next day withdraw the same denomination clean. In the main, it’s free, it’s supplied, or it’s at cost, it’s on demand. All the production decisions are made based on what expected demand is. It’s quite complicated actually, because they have to decide how much to order. When the bank notes come back in, they have to decide how worn is too worn before a note gets shredded. In some cases, they’ve had to adjust those standards to increase supply in the short run. Basically, currency is supplied on demand.

Beckworth: Demand driven. You have this wonderful chart in a recent Fed note. Maybe we can talk about this more too in a minute. You show the Fed’s balance sheet going back 100 years. It’s really cool. We’ll provide a link to it, listeners and watchers of the video. In it, one of the steady parts is this currency part. People sometimes call it the currency franchise because it’s a cheap funding source for the Fed, an important cheap funding source for the Fed. It’s demand driven. It’s one of the parts of the Fed’s balance sheet that the Fed doesn’t have control over.

Judson: Yes. It’s called an autonomous factor.

Beckworth: Autonomous factor, like TGA, Treasury General Account.

Judson: Yes, TGA is the other autonomous factor.

Beckworth: That one, we’ve had a lot of conversations on this podcast, I’m sure you have as well, how the Treasury General Account, which is the federal government’s checking account at the Fed, it can have some big, big swings, particularly with the big deficits we’re running these days. That’s the unpredictable one. Currency demand is fairly steady though, right, over time?

Judson: It has been. Back in the day of scarce reserves, the TGA was quite small because any funds beyond a quite narrow range were basically farmed out to banks. We don’t have that system anymore. I don’t know if there’s any chance that it will ever come back. The practice of having the entire TGA be at the Fed started basically in 2008, 2009. Of course, it’s quite volatile. It used to be constrained to a range between $5 billion and $7 billion a day back in the day.

Beckworth: Now, it can be far larger.

Judson: Oh gosh, yes.

Beckworth: I just had another podcast with Bill Nelson. One of the things we talked about are some of these proposals to effectively neutralize or almost even partition the TGA in a way. Annette Vissing-Jørgensen has this proposal of building a bunch of Treasury bills up. You do open market operations to offset swings in the TGA. Bill has a similar one with repo: Money comes in, put it back out and vice versa so that it becomes less of an issue. It’s one of the reasons argued for an ample reserve system. You’ve got to have plenty of reserves because if there’s big swings and reserves are affected, then you lose monetary control and so on.

Judson: Right. There’s ample, but you don’t necessarily want crazy ample and volatile. Annette is in Monetary Affairs. I haven’t spoken with her, so I don’t know why it doesn’t seem to be an option to go back to the TT&L, the Treasury Tax and Lending System. Anyway, TT&L was the way that the TGA was allocated across depository institutions.

Beckworth: There is a new Fed chair coming in and he’s looking to shake things up.

Judson: I don’t know. I just haven’t had that conversation with anybody. Maybe it’s wildly impractical for some reason. 

Beckworth: I think I recall one of the reasons the TGA became so important was because it was cheaper to have the federal government park its funds there than it was at the banks when they started paying interest on the reserves. There’s a tax incentive, tax reasons we, as taxpayers, should care about.

Back to currency, I want to go there because, again, you are the in-house expert, or you were the in-house expert because you’re now officially outside the Federal Reserve.

Judson: I’m on the outside now.

Beckworth: On the outside, but you’re still an expert. What drives it? In particular, this recent period we went through with COVID, it’s spiked, right?

Judson: Oh, yes.

Beckworth: What is your understanding of what happened? What’s driving that currency demand?

Judson: The interesting thing about the COVID episode was that in the very short run, say, the first three months, about a third of the demand was foreign, about a third was domestic, and about a third was just banks loading up their vaults to the ceiling. To me, that was entirely understandable. We really had no idea, and certainly if you were trying to fill ATMs, if you were a bank, you didn’t want your ATMs to run dry. You didn’t necessarily know when you would be able to get another shipment of cash. There was a huge run-up in vault cash, because that was a piece of it, the foreign was a piece of it, and then the domestic was a piece of it. It’s straight-up precautionary.

We know that people weren’t going to stores, so more payments were being done electronically. It was straight-up precautionary. You heard stories about people, nonetheless, running out to the ATM.

Beckworth: It’s a little bit puzzling, though. As you mentioned, probably both of us do most of our transactions online, maybe even with apps, yet this precautionary demand for cash. It’s still pretty large, it’s not like it’s come down a lot. Has it?

Judson: The thing that was really surprising was that currency demand remained super strong through 2020 and also 2021. Then we had a little bit of a take-back in 2022, 2023. I think it’s still not clear what the longer-term trend is going to be, whether we’re going to see a lower trend going forward or whether we’ll go back to the usual trend. 

On the domestic side, I think in the paper I have about currency demand, I break it down by denomination. We’re seeing really slow growth in the smaller denominations, and in some cases, negative growth. That tells me that for domestic transactions, currency is less commonly used now. We still see very strong growth in the larger denominations. Maybe that’s international demand. We definitely see spikes in currency growth and in international shipments whenever there’s a crisis in one country or another. Some people will tell you that it’s underground economy, but first of all, that’s really hard to assess. Second of all, it doesn’t show any particular patterns.

Beckworth: It’s interesting, just going back to this point you made earlier, that even though we live in a largely digital age—I was recently on a podcast discussing this with Dan Awrey, because he has a book out on, there’s old money, new money, and good money, bad money. It was in the context of stablecoins. The next generation definitely is all digital payments—Venmo, Cash App, PayPal. The notion of taking out physical currency, nobody carries physical cash in a younger generation than our age.

I should be careful. I’m sure there’s some who still do, who maybe operate on the margins of the economy, and maybe those being afraid to be captured by certain federal agents are still carrying a lot of cash around. A majority of people are using digital transactions in the younger generation, yet there’s all this domestic demand for physical cash. Is it just older people using it? Beyond the maybe illicit or people who are concerned about their standing in society, beyond that group, is it just older people using it? What’s your sense?

Judson: I wish we knew more. We do have some very nice surveys on payments, but even those surveys can’t really account for as much currency as we have in circulation. It’s a mystery. 

I have a little bit of a side hobby, because an empirical regularity is that if I’m talking to somebody about, “Oh, you work at the Fed. What do you do?” I almost always tell them I work on cash, because nobody wants to hear about the other stuff, let’s face it. Nearly every time I start talking about cash, they will tell me a story about their mother or their brother or their whoever who’s got a shoebox full of cash. It’s an empirical regularity at this point. There’s a tale out there of people who are holding a lot of cash, and those people are not going to be participating in these surveys.

Beckworth: I see.

Judson: Every so often, I’ll hear something about somebody paying for something with cash, and I’ll be like, “Can you tell me more about that?” There has to be a certain level of trust, because otherwise they’re like, “Why are you asking me this question?”

Beckworth: “You’re a fed.” Do you see a role for cash? Put aside what the data shows. You’ve looked at this for a long time. Let me just give two stories here, the reason I bring this up. I look at my brother and his family. They were in Asheville, North Carolina, when the hurricane came through and a lot of destruction. Their home wasn’t harmed, but they were surrounded by water. They had to get out. They got out, but everything was shut down in terms of power. They had hardly any gas in their vehicle. They get to the gas station, and they only took cash. My brother did not have cash. My niece did. There’s a data point of a young person having cash. In any event, they were able to buy gas until they were able to drive out, get to a place that was still operating with electricity. I can see moments like that.

The second story I want to give is from a previous guest of the podcast. He works at the Riksbank, Per Åsberg Sommar. He was telling me that in Sweden, they really pushed hard to get rid of cash, as you probably know well, starting in 2015, early 2010s. They did. They got rid of a lot of cash, look at the currencies as a percent of GDP.

Judson: They’re the poster children.

Beckworth: Now they’re having regrets. They’re like, “Maybe we want some physical cash for people who aren’t a part of the digital payment system or for emergencies.” I guess just stepping back as an economist, looking at tradeoffs, we don’t want to have a purely cashless society, do we?

Judson: I think people would be very uncomfortable with that. I think that in the case of Sweden, they actually have offline capability for their payment system, but they are very concerned about the inclusion effects of older people or people in remote locations and, “The bank doesn’t have cash anymore.” I think that’s a problem we want to avoid. I think there is a fundamental privacy consideration too. To the extent that you’re concerned about privacy, it’s useful to be able to pay with cash if you have a concern.

Especially when we talk about the potential for a CBDC, which by the way, in the US is absolutely not on the table at this point, you could imagine that if there were a CBDC, that people might think, “It’s one thing if Visa or Target knows about all my spending, but the government? It makes me uncomfortable.”

Beckworth: We might see even more demand for currency pickup in a setting like that?

Judson: Yes. The Chinese, when they introduced their central bank digital currency, they were quite upfront about the fact that they wanted to compete with the private providers and also they liked the idea that they could get the information.

Beckworth: A little scary. There’s a great case study of how it can be used. It’s probably the most successful CBDC to date, would you say, China?

Judson: It’s the most successful. There are four or five CBDCs that have been introduced and they’ve just had absolutely minimal take-up.

Beckworth: We can talk about CBDC. I recently had some guests on talking about the case in Europe. The Europeans, they’re doing a very watered-down version of CBDC because they don’t want to harm the banks. Banks are very important. They’ve put the throttle on private stablecoins, euro-based stablecoins. Throttle might be too strong of a word, but they put in caps and limits on how much someone can use a CBDC. That’s to protect the banks. The comments I got were, “That also opens the door for dollar-based stablecoins to step in and fill the void that they have created by policy choice.”

Judson: They’ve been quite explicit that they consider dollar stablecoins a risk to their monetary sovereignty. It’s an interesting regulatory and diplomatic challenge.

Beckworth: That is so interesting to me. It’s like they see this, they know what they’re doing. Just help me understand then. Why don’t they do something different? Are banks too powerful? Are they too stuck in this path dependency?

Judson: If your residents want dollars, there’s not much you can do about it. You can make it harder. Generally, and this goes for stable places like Europe and also for unstable places, the best thing you can do is make your own currency more appealing and stronger. You’re not going to scare people out of holding a safe asset. If they view dollars as a safe asset, they’re going to want it.

Beckworth: It is interesting to see all this conversation there. I guess I’ve just been a little puzzled by, A, they’re putting themselves in this place by policy choices they are making. Then, B, how much of a threat is the dollar really? Are people really going to start using the dollar that much? As an American, I’m actually excited about this. It’s extra seigniorage. Of course, dollar-based stablecoins seigniorage to private firms. Nonetheless, it’s demand for Treasuries, though, at least indirectly.

From our perspective, in fact, some of the ECB officials I’ve read, they talk about it not just about losing monetary sovereignty, but about continuing to finance American deficits on the back of our money, giving up our money sovereignty. They are worried.

Judson: Yes, they’re very worried.

Beckworth: Does it not seem a little bit overly worried to you, or is there a legitimate fear that we could start seeing dollars being used in Europe as much as euros?

Judson: I think it’s not unreasonable that they’re concerned. I think the scenario where dollars completely displace euros is a fringe case, but part of what you do as a central banker is you worry about fringe cases. That’s your job.

Beckworth: Okay. Good point. That’s a good point. It’s in their blood.

Judson: I’ve made this type of statement many times. It’s our job to at least think about the fringe cases. We can acknowledge that they’re low probability, but we still need to think about them.

Beckworth: A few more questions on currency. I want to go back to TIC data and some of the research you’ve done with that and safe assets. You go to places overseas where there is hyperinflation or very unstable monetary regimes, Venezuela maybe today, Zimbabwe, back to 2008. I have actual physical currency from Zimbabwe.

Judson: So do I.

Beckworth: It’s a great illustration. I used it when I used to teach. I’ve used it in talks where you show the bills, and they were dollars, and it was in English, $1, $5, $10, $20 bills in Zimbabwe early 2007. Of course, by the end of, I think it’s November 2008, there’s $100 trillion bill. They thought, “Okay, that’s enough.” What was interesting in that story is, as you know, people in Zimbabwe were trying to use dollars and South African rand to a lesser extent, and the state was like, “No, we’re going to arrest you if you use this foreign exchange.” Finally, the state said, “We give up.” Dollars just magically appeared out of nowhere.

I wonder what if they’d had dollar-based stablecoins back then. They could have evaded the state even easier. They could have avoided the threat of arrest carrying physical currency around.

Judson: We have to rewind and remember what the technology was then. I don’t think people had smartphones then, for example. I remember having a conversation with somebody at the IMF. They had this very elaborate model for forecasting inflation in Zimbabwe. I said, “All you need to do is go and look at the black market versus the official rate for dollars, and there’s your answer. You don’t need anything else.”

Soon after I joined the Fed, I was on a really fantastic project that started with that trip to Belarus that I mentioned. It was a cross-agency team, and we traveled to countries that had either known high dollar usage or reported high counterfeiting incidents. We had people from the Secret Service because they cover counterfeiting. We had people from the Treasury because they cover banknote design. We had people from the New York Fed because they operate the biggest vault with the biggest distribution.

For me, it was absolutely fantastic because I got to meet and work with everybody, and best field trips ever. Went to all these amazing vaults and stuff like that. At that time also, you couldn’t just look up on the internet what was going on. You had to go. That became a congressionally mandated project, and it went on for about 10 years and ended in 2007. Unfortunately, it was not renewed.

Beckworth: The goal of that was to just count and track the amount of dollars overseas?

Judson: Yes.

Beckworth: Okay.

Judson: Part of the enabling legislation was that we had to write a report. There are actually three reports from the Treasury called The Use and Counterfeiting of United States Currency Abroad, part 1, part 2, part 3, from 2000, 2003, and 2006.

Beckworth: This is where we get that two-thirds of our currency’s overseas data?

Judson: Yes.

Beckworth: Interesting.

Judson: I’ve updated it since then.

Beckworth: Is that still a good approximation or not?

Judson: What I like to say is as much as two-thirds or between half and two-thirds.

Beckworth: Of the currency is overseas.

Judson: Yes, because we really don’t know. It’s exceptionally hard to measure.

Counterfeits

Beckworth: You brought this up, so I want to spend just a few minutes there before we go to safe assets, and I promise we’ll get there, but counterfeits. You have an article out, and I’ll encourage listeners to go to your website at the Fed. I assume it’ll still be up for some time.

Judson: I guess.

Beckworth: A number of your interesting articles there, one was on counterfeits, and I think you said up to $30 million in counterfeit notes. Is that about right?

Judson: That sounds about right. Part of the legislation required that we produce estimates of counterfeits, and so I did. Those estimates were in the reports, and the Secret Service cited them for years. When I was on my rotation in cash, I said, “You’ve been citing these numbers that are from 2005. Maybe we should update them because they will be lower, I promise you.” Sure enough, they were lower by a factor of 10.

Beckworth: Why were they lower?

Judson: We have better bank notes now. Technology is amazing.

Beckworth: They’re harder to counterfeit.

Judson: Yes. You have a couple different data sources, you have to square the circle and whatever. I was very happy to get that out.

Beckworth: Okay. It is harder and harder to counterfeit. Now, I know there’s some notorious cases in the past. North Korea was famous. Do they still attempt to counterfeit?

Judson: I don’t know. That’s in the category of, “Ruth doesn’t need to know, so we don’t tell her.”

Beckworth: Maybe a state secret there. I guess the $30 million number seemed, to me, honestly, a little bit low. If I were North Korea, $30 million is not going to get you much. Maybe it’s enough to keep the ruler happy, I don’t know, of North Korea. If you’ve got a whole country dedicated to counterfeiting, I think it’d be a lot more than that. It’s remarkable, which is a testament to whoever makes the bills. In fact, is it the US mint engraving?

Judson: The Bureau of Engraving and Printing, which is right downtown, I think is the second most popular tourist destination in DC.

Beckworth: Not far from here in the studio, yes.

Judson: The Bureau of Engraving and Printing has one operation here in DC and then another one in Fort Worth. 

Beckworth: They make the notes.

Judson: They print the money. We have quite active efforts underway to assess what future banknotes should be like and what security features are effective and are durable, because we have very stringent standards for banknote durability.

Beckworth: Have you watched any of the movies where people either, A, try to rob a regional federal reserve bank because of the currency distribution, or B, major counterfeit operation? Have you ever watched these movies and like, “No, that doesn’t work. That does work?”

Judson: Yes.

Beckworth: Okay. Your family’s like, “Please, just be quiet. Let us enjoy the movie”?

Judson: Yes. Mad Money is a particular guilty pleasure. Come on, it’s got Queen Latifah, Katie Holmes, and Diane Keaton.

Beckworth: All in one setting. Yes, that’s awesome. There’s been some fun movies out there about robbing.

Judson: Then there’s the Die Hard movies.

Beckworth: There’s the Die Hard movies. I think it was Reacher on Amazon Prime, I think the first season, what they had was a counterfeiting—it’s near the end of the season. The big reveal is the criminal operation is they’re taking $1 bills, bleaching them, and using them to print some higher denomination, because the material itself is important. I’m like, “Would that really work?”

Judson: That’s why those pens that they use at the store, from what I understand, they detect one of two things. One is they detect wood pulp, because real bank notes are made from rag and don’t have any wood pulp. The other is that they detect bleach because real bank notes are not bleached.

Beckworth: Someone who tried that would be caught.

Judson: Generally with counterfeits, the thing is, it’s one of these, “Fool me once, shame on you, fool me twice, shame on me.” You can usually get away with passing a not very-good counterfeit once, but not more than that.

Beckworth: Now, in the Federal Reserve System, I believe that the New York Fed is the biggest distributor of notes. Is that right?

Judson: I think so.

Beckworth: Then somewhere two or three down the list is the Atlanta Fed, I believe?

Judson: Atlanta is really big because the Miami cash office is part of the Atlanta Fed. There are reserve banks, and then there are offices, which are satellites of the reserve banks. The offices can and do open and close over time depending on operational needs. We used to have a lot more offices when we had paper check processing, and then a lot of them closed. Atlanta has a very big office in Miami, and I’m told they have a very nice shiny new vault, and I really want to go see it. I’m not sure I’m going to be able to now that I’m on the outside.

Beckworth: I interviewed Raphael Bostic last year, and he’s mentioning the new vault in Miami.

Judson: Yes, but he’s retiring too.

Beckworth: Okay. We’ll have to make a special trip down there, all three of us, and we’ll take a tour of the new vault.

Judson: It’s right by the airport.

Beckworth: A lot of that cash, I’m assuming, is exported to Latin America?

Judson: Yes.

Beckworth: Okay. I made a Substack note, I think I shared this with you earlier. It was fascinating to me to see that the Atlanta Fed—maybe there’s one other—but definitely the Atlanta Fed was one of the few regional banks that did not experience operating losses during these past few years because it had a robust currency franchise.

Judson: I think I might have mentioned this to you at the time, and I actually asked Raphael about it because he was chilling right outside my office one day because my office at the Fed was one floor down from the cafeteria, so sometimes people would hang out there. There’s some accounting rule that determines what bank notes are allocated to what reserve bank, but I don’t know what it is.

Since it was sheer idle curiosity, I didn’t feel like pestering my friends in accounting to ask them, and I couldn’t find it by looking it up in the accounting manual because I am sure there is a calculation, and I don’t know what it is.

Beckworth: I also think part of the equation to this, though, in terms of the operating loss is how they also distribute this SOMA portfolio. The New York Fed buys all of these securities, and that’s generated the losses because they bought long-term bonds with 1% interest earning, and then the reserves are paying 4% or 5%, and whatever regional bank is holding those bad boys are taking a big hit. How they allocate that also, I think, plays a role. The Atlanta Fed is unique. It has this robust currency franchise. It’s exporting abroad.

Judson: The thing is that I’m not actually sure how much they’re exporting. I know they have a big operation, but I think a lot of it is coming back in.

Beckworth: Net may be pretty small.

Judson: I used to have access to that dataset, but I haven’t looked at it lately. The rule is that the reserve banks will provide cash on demand, but you’ve got to come and pick it up. They always want to come to the closest office and ideally. The couriers prefer a nonstop flight.

Beckworth: Oh, it could be going to other places in the US, not just Latin America, because it’s near the Miami airport?

Judson: If it’s going somewhere in the US, it’s probably going to be somewhere around Miami. Definitely, if it’s going abroad, if it’s a destination where there’s a nonstop flight from Miami and not from New York, they’re going to want to pick up the cash in Miami.

TIC Data and Safe Assets

Beckworth: All right. Let’s move back to your work on TIC data and safe assets, because this was a fascinating interest of mine for a while, at least before 2020. Is there a safe asset shortage? You had a paper, “Elusive Safety: The New Geography of Capital Flows and Risk.” Maybe let’s begin with what was the point of the paper? Give us the executive summary.

Judson: Full disclosure, that paper never got to the state of completion that I would have liked. I think there was more to be done, and it’s one of my regrets that I wasn’t able to finish it out. The idea was that there are tax haven countries, and that in those countries, because they’re more opaque, people are likely holding riskier assets. That’s the basic idea. I never got it to the state that I wanted to get it to.

Beckworth: This is part of the global dollar system, people holding Treasuries abroad. Any misconceptions about who’s holding these assets abroad? Is it advanced economies?

Judson: There’s what we call the custodial bias. It’s not really a misconception. It’s just a feature of the data. In a couple of my papers with Carol Bertaut, we talk about it. In the more recent paper with Nissa Kim that compares the TIC data to the IMF’s—it used to be called CPIS, Coordinated Portfolio Investment Survey—now it’s called PIP, Portfolio Investment Positions.

We did a comparison of those two, and they collect the data on a different basis. We have to look from the US side because that’s what we have the authority to do. The IMF, however, collects it from the relevant countries. For example, for Belgium, what the IMF’s data will say is, “Here’s how many Treasuries Belgian residents are holding.” That number is typically much lower than what we see being recorded as Belgium. That’s the custodial bias. It’s not really a misconception. It’s just a feature or a shortcoming of the data. You can’t always get everything in your data collection.

Beckworth: Do you still think there is this demand abroad? A lot of talk that it had fallen. What do you see in the data?

Judson: There’s a small cottage industry in the office debunking various and sundry alarmist articles—

Beckworth: Plenty of those.

Judson: —that never say anything when there’s a strong month for Treasury demand, and then when it blips down the tiniest little bit, everybody’s hair is on fire. I think that one thing that’s going on is that, generally, demand for Treasuries and demand for US assets is solid, but Treasury issuance has been so gigantic that the foreign share, almost by definition, has fallen. The foreign quantity is still going up, but the share is going down just because the denominator is going up. There’s a lot of alarmist articles that use or abuse that feature of the data.

Back a few years ago, in 2024, I think, we introduced a new way of reporting transactions that’s much more accurate. Before that, a lot of times the TIC transactions data would give strange numbers, and people would seize upon these numbers. One thing that Carol Bertaut and I did was that we actually issued a monthly data dump of estimated transactions that we thought were more accurate and that, in fact, were used by the BEA and by the financial account release. People would still use the raw transactions data even after we explained that they were misleading.

Beckworth: This adjusted TIC data, where do we find that? Is that on a Fed website, or is that on the Treasury TIC website?

Judson: Up until two years ago, the Fed website had an update. Carol’s and my paper was there, and every month there was an update. What we decided was that, basically, we would give this new data collection system two years, and that if we were okay with how it was performing, then we would kill off the estimated because there’s no reason. We did that. We put that paper out late last year, I think.

We don’t do the estimates anymore. I think in that paper that said we’re not doing this anymore, we said, “Here’s the last hurrah. Here’s the last dataset. This is it. Now just use what’s on the Treasury website. Look, compare them. It’s doing a good job, and it’s direct measurements, and you should use them.” Now it’s on the Treasury’s website. We put an allusion to this in our note. They will soon have the TIC data in FRED, which will make it even more user-friendly. I don’t think it’s happened yet, but—

Beckworth: It’s coming.

Judson: —we’re right there.

Beckworth: One of the great public goods the Federal Reserve System has provided to, at least, some people like me and you who use it in this country. 

Dollar-Based Stablecoins

We’ve been talking about dollars and currency and TIC data, safe assets. This all centers around this theme of a global dollar system or dollar dominance. One of the, I think, important developments recently that could affect this, and maybe strengthen it even, is the emergence of dollar-based stablecoins, not just the emergence, but then the law, the GENIUS Act, which makes it official. I know rules are still being written about it as we record. A lot of questions.

We found out today on March 4 that Kraken Financial is getting access to a Fed master account, these limited Fed master accounts—skinny Fed master accounts, as Governor Waller likes to call them—which is pretty surprising because I thought these were still being reviewed and processed.

Judson: So did I.

Beckworth: Kraken, of course, applied first late in October 2020, so it’s been a long time. Maybe this is a test run. We’ll put that out in the wild and see what happens with this, which may be a good way to work out some of the kinks. Nonetheless, to me, the writing’s on the wall, so to speak, in terms of, dollar-based stablecoins are here with us. Yes, there’s concerns. Yes, there’s also opportunity. My big push here, what I want to ask you about is, do you see it affecting dollar dominance? Maybe you can define what you think dollar dominance is, and then what role stablecoins might play in it.

Judson: One thing that is surprising to me is the extent to which dollar-denominated stablecoins so completely dominate the market. It’s 90%, 95%, 99%. It’s incredibly high. I don’t understand why that would necessarily be the case, but here we are. Anytime there’s a dollar-denominated asset that’s being popularized, it’s going to, I would say, increase the standing of the dollar. I don’t see why it necessarily has to be that way going forward.

Beckworth: An alternative stablecoin?

Judson: Why don’t we have euro stablecoins? I don’t understand. The market has not supported euro stablecoins.

Beckworth: The biggest dollar-based stablecoin is outside the US—Tether, which is outside of the regulatory fence of GENIUS.

Judson: Tether made a point—the day the GENIUS Act passed—they made a point of having a press release saying that they were planning to have some or all of their operation come into compliance with US regulations. I haven’t seen any news since then. That could mean they’re working on it and they don’t want to say anything until they’re all done, or they could just have been saying things. I don’t know.

Beckworth: That’s so interesting.

Judson: They were right there the day it passed.

Beckworth: I think it’s interesting and, I daresay, useful to have this experiment. Now, some might be worried about financial stability, but right now it’s $300 billion-plus in stablecoins. Bitcoin is in the trillions. This is, in some sense, small potatoes, but, it’s an important experiment of sorts. Having Tether outside the US—and we know that some of their assets are riskier than what Circle has.

Beckworth: If we look at this crypto winter we’ve been in since October of 2025 when crypto took a hit, dollar-based stablecoins have plateaued around $300 billion. If you dive deeper into the data, you see Circle is one of the big ones that actually went down. Tether actually went up.

Rashad Ahmed did this paper, he’s a former podcast guest, where he highlighted; the reason Circle went down is because a lot of their activity is tied to crypto, a lot of the stablecoin usage is tied to crypto. Bitcoin and Ethereum, they all go down, Circle goes down. Tether went up. Tether seems to be more used in developing economies. I’m speculating here, and all the people out there may hate what I’m going to say, but maybe Tether’s serving more as a true substitute for physical dollars out there.

Judson: Tether and stablecoins, in general, seem to be a way to execute payments across borders. People working as translators for somebody in another country, they get paid in stablecoins or the stablecoins are the vehicle. They do seem to be cash, but more mobile.

Beckworth: Do you see them displacing physical cash more than bank deposits, or a completely new demand created beyond the existing stock of dollars out there?

Judson: I think it’s really hard to say. The use case in an advanced economy with many existing payment options is quite limited, but the use case in other countries, I think, probably just demands on the circumstances of that particular country.

Beckworth: That’s where you would expect to see more growth, more usage?

Judson: Yes. For any kind of payment that’s not person-to-person or that’s not in-person, you could imagine that it would be more convenient to use a stablecoin.

Beckworth: It’ll be interesting to see how this all unfolds and how future Fed economists who try to fill your big shoes that you’ve left them at the Fed, how they handle and think about this issue. 

With that, our time is up. Our guest today has been Ruth Judson. Ruth, thank you so much for coming on the program and sharing your insights with us.

Judson: You’re welcome. Thank you for having me.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth, and follow the show @Macro_Musings.