Every Saturday morning, Vince Armstrong and his three sons wheel up in their 2 1/2-ton truck to a dock at the Federal Reserve Bank on Baltimore's courthouse square, load a few million dollars worth of shredded U.S. currency and haul it off to be bulldozed into a swamp in Glen Burnie.

It is the ignominious end of the line for worn and inflation-wearied paper money.

Because it takes more dollars to buy something than it used to, there is more currency in circulation than ever before, wearing out faster than the money handlers can collect and dispose, federal officials say.

"There's more "dirty" money in circulation in the last three years than people are used to," according to Federal Reserve official Charles W. Bennett in Washington. Banks are complaining.

Some of the nation's spent money is still cremated - at least one district bank that lacked its own furnace used to send the cash to an undertaker - and in Dallas, federal officials say, the shredded notes are sold to oil men for packing drilling equipment.

Officials hope that new machines and new kinds of money will help them catch up with the accelerated cash flow.

Inside the Baltimore bank, to the people who make their living tossing around millions in cash like longshoremen - loading and unloading, chopping, taping, counting or shredding it - all that money is, as one put it, "just another day's heavy lifting."

"Just rags to me, hon," said Millicent Adcock, a gum-chewing redhead who shoved a heavy dolly of about $3 million into a cage with the air of a waitress rolling a cartload of BLT's and fries.

She said she had worked at the Baltimore branch for 27 years - "too long." She earns about $12,000 a year.

The cash handlers work in an atmosphere of badges, armed guards, slamming electrical sliding doors, a 52-ton steel and copper vault door, alarm systems and constant checks on each other.

The Federal Reserve branch in Baltimore serves as a kind of wholesale distributor of cash to banks in its region, including those in Washington. It is one of 37 branches in 12 regions nationwide. The banks order cash from the federal money factory - the Bureau of Engraving and Printing - to meet public demand, and then send it off to commercial banks to be circulated to the public and then back to the Federal Reserve.

A dollar bill, which costs two cents to manufacture, wears out in only 18 months.

In the last hundred years, the amount of cash in circulation in the country has risen from just over $816 million, or about $16.76 per person, to more than $100 million, about $450 per person.

With inflation pushing up the cost of everything, the public appetite for larger denominations has grown, especially in "big swinging towns" like Washington, said Allene Taylor, assistant manager in the Baltimore cash department. "There's been a regular run on fifties and hundreds. We just had to rush an actual emergency shipment of them to one Washington bank."

Part of that demand is the result of special orders placed for embassy personnel of Mid East oil producing countries who are partial to large bills just for "walk-around money," according to some banking sources.

The public demand for cash is also seasonal, highest at Christmas, said shipper Alan Hirai, one of a three-man team of "shippers." He was stacking "bricks" of new money in a small room that he said contained about $31 million and were destined for Washington banks.

The ink, whose formula is one of the government's top secrets, filled the room with its unique fragrance.

Government officials have been trying to ease the pressure on money-processing facilities.

One approach has been the reissue of the $2 bill, introduced during the bicentennial celebration, and, more recently, a dollar coin with the portrait of Susan B. Anthony. Both are designed to relieve the pressure and cut costs on the dollar bill. However, Americans traditionally have resisted such changes.

The government also is banking heavily on some fancy new high-speed processing machines to sort, count and turn thumbs up or down on used bills - machines that officials say will cut down on the number of "dirty" bills allowed back into circulation.

For decades, humans sorted the bills individually on simple machines. A really good counter could do 35,000 bills in a day, veterans said.

Current machines allow sorters to do 90,000 bills a day, but they do it in $100 chunks, rather than bill by bill, and officials said, "they miss some bad ones."

New $300,000 high-speed machines, of which the Baltimore branch recently acquired two, can count up to 72,000 notes an hour and average 650,000 a day. They catch virtually all unusable money, as well as counterfeit bills, officials said.

Under the old system, employees, like Vicki Gilliam, use a clattering machine to punch holes in lower denominations and cut in half the larger ones.

"I'm used to the money," she said. "I don't sit there thinking, if only I could have this. But it does impress your friends. You know, they say, all that money, and they think we must be rich just because we work here."

Under the manual system, the banks take elaborate security precautions to make sure the money is destroyed, officials said. After the bills are cut in half, the two parts are separated and handled by different teams, counted again and verified. A designated "destructor," selected at random from a list of eligible employees on the morning of the "job," can stop the operation at any point and recheck. Other auditors, bank examiners or managers are liable to pop in any time for a check, officials said.

The new machines make these precautions unnecessary.

When an unfit bill is detected the mechanical brain sends it straight through a pipe to its doom in the shredder, where it is hashed into a discredited greenish hay.

The machines are made by private companies, one in Texas and one in Pennsylvania, which specialize in security printing, such as stock certificates, airline tickets and currencies for several other governments, officials said.

The cash mulch goes into 35-pound bags and out onto the loading docks, where Vince Armstrong and his sons haul away 75 to 100 of them each week.

The government would like to sell more of its used money. But there are problems.

"That ink makes it so you can't do anything with it. Stuff smokes like hell," Armstrong observed. "A guy in California put it in jars and advertised it...a few years back, but who in hell is gonna pay $10 for a Mason jar full of torn up money?"

"I tried to use it for mulch, but the damn stuff wouldn't rot," said J. E. (Ed) Thompson, manager of the cash department.

Anybody can bid on it, he added, but the catch is that you can't take less than a year's worth. CAPTION: Picture 1, Bills going back into circulation are automatically counted, bound.; Picture 2, At the Federal Reserve Bank in Baltimore, a worker prepares to move $3 million to sorting rooms. Photos by Gerald Martineau - The Washington Post; Picture 3, Security guard swings open 52-ton steel and copper door to bank's vault.