In Argentina, according to central bank data, currency in circulation grew by 165 billion pesos between March 7 and April 7. This represents a growth rate of 14% over the past month or 62% over the past year. According to media reports, the confinement policies have led families to withdraw record levels of cash. One of the Central Bank’s main concerns was to ensure ATMs were replenished, particularly for the long Easter weekend.
In Australia, the Reserve Bank has reported in its Financial Stability Review that over-the-counter withdrawals of cash from banks were elevated over the second half of March as some customers with large balances sought to hold precautionary funds. This included a small number of customers making very large withdrawals (over $100,000, and in some cases into the millions of dollars). The Reserve Bank worked closely with the large banks and cash-in-transit companies to ensure branches had sufficient cash supplies.
The Sydney Morning Herald reported on April 9 that “Australians did not just hoard loo paper and tinned tomatoes as the coronavirus pandemic spread through the country last month – they started stockpiling cash.”
In the euro-area, the value of euro banknotes in circulation has increased by the largest amount since the 2008 financial crisis, according to new data from the European Central Bank. During the month of March, the value of banknotes in circulation increased by €36 billion to a record €1,314 billion. This represents a year-on-year increase of 8% and is the strongest increase since October 2008, following the collapse of Lehman Bros.
One third of the growth, has been captured by the €200 denomination which indicates an increase in store of value demand. However, transactional denominations have been increasing as well and this is rather counter-intuitive as many media have been reporting that consumers had been shifting to digital payments and contactless payments in particular for fear that banknotes could contribute to spread the virus.
Could consumers be applying Gresham’s law? Named after English financier Sir Thomas Gesham (1519-1579), the law states that ‘bad money drives out good money’, in other terms people prefer to spend the ‘bad money’, in our case contactless cards and hang on to the ‘good money’, i.e. notes and coins.
In the US, currency in circulation grew by over $70 billion between March 3 and April 1, to $1,876 billion, representing a 4% increase. This exceeds the spike that followed the collapse of Lehman Brothers in September 2008.