Banks, gangsters and the strange resurgence of cash
economist.com
Banks, gangsters and the strange resurgence of cash
1–10 of 254 posts
Re: Banks, gangsters and the strange resurgence of cash
#2They are circulating in places beyond the borders, I assume. We let North Korea print their own$100 bills for years as a form of off the books aid, but once that stopped the underworld needed someone to provide the currency.
Remember the pallets of cash being sent to Iraq?
Re: Banks, gangsters and the strange resurgence of cash
#3Re: Banks, gangsters and the strange resurgence of cash
#4They are circulating in places beyond the borders, I assume. We let North Korea print their own$100 bills for years as a form of off the books aid, but once that stopped the underworld needed someone to provide the currency. Remember the pallets of cash being sent to Iraq?
I had to Google the north korea thing.
https://en.wikipedia.org/wiki/Superdollar
TIL. Thanks!
Re: Banks, gangsters and the strange resurgence of cash
#5I don't know why the article frames it as some crazy big mystery and tries to come up with different hypotheses for it throughout. The answer is clear from the very first example they start with, and explained further towards the end – the cash is circulating in the grey/black market economy and across international borders. Demand for cash is rising because this economy is growing at a similar rate to the regular one.
As for the "why does nobody care part", the possible explanation is unconvincing. Yes central banks enjoy the power of being the sole issuer of currency, but the few cents per note they get to keep is hardly where their real interests lie.
Re: Banks, gangsters and the strange resurgence of cash
#6There is a lot of rumor and speculation about very benign things.
1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missing". If you want to change the situation, then raise interest rates and increase law and order.
2. Crime. Sure, crime is conducted in cash, and a lot of that money is funneled to Latin America. This is a known thing -- it's more seignorage income for the Fed unless the cash comes back into the economy, but much of it never will as several economies are dollarized. I don't think there has been a material increase in organized crime, so I would think household precautionary savings is the reason.
3. Let's get some perspective. $50 Billion in cash is basically nothing. It's like 2% of currency in circulation. So this whole article is complaining that 2% of currency is not circulating. Well, OK. Must be a slow day over at the Economist.
Re: Banks, gangsters and the strange resurgence of cash
#7There is a lot of rumor and speculation about very benign things. 1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missin…
It’s $166 per person in the USA. The horror.
Re: Banks, gangsters and the strange resurgence of cash
#8There is a lot of rumor and speculation about very benign things. 1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missin…
Argentinians have a lot of cash that they (we) use as an edge against inflation
Re: Banks, gangsters and the strange resurgence of cash
#9There is a lot of rumor and speculation about very benign things. 1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missin…
The precautionary savings of physical cash may even be on the rise as people realize how easily their economic lives could be switched off in an instant in the increasingly digital world, whether by being intentionally targeted or accidentally disabled with a lot of bureaucracy slowing down the correction.
Having enough cash under your mattress that authority figures can't easily take from you is a psychological comfort.
Re: Banks, gangsters and the strange resurgence of cash
#10There is a lot of rumor and speculation about very benign things. 1. Precautionary savings. In a low interest rate environment, there is not the same penalty for holding cash as getting interest in a savings account. A lot of people find it prudent to have a buffer of cash, say enough to cover 1 month of expenses. So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missin…
Argentinians have a lot of cash that they (we) use as an edge against inflation
I assume you mean USD cash to hedge against inflation of Argentinian pesos?