The US and the Euro Area are Seeing a Surge in Cash Demand
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US cashMoney in physical form such as banknotes and coins. More demand grew by $70 billion in a month
In the US, currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More 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 and is the strongest increase since the Y2K bug when many feared that computer glitches would take down the financial system.
Source: Board of Governors of the Federal Reserve System (US), Liabilities and Capital: Other Factors Draining Reserve Balances: Currency in Circulation: Week Average [WCURCIR], retrieved from FRED, Federal Reserve Bank of St. Louis
Jelena McWilliams, chairman of the Federal Deposit Insurance Corporation, which safeguards bank accounts has encouraged bank customers to leave their moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More in the bank. “Just as it is not necessarily rational to hoard toilet paperSee Banknote paper. More, it is also not rational to hoard cash,” McWilliams said in an NPR interview. The Wall Street Journal reports that some banks have faced temporary cash shortages, often in affluent neighbourhoods, but regulators warn against keeping large amounts of money at home.
€ cash demand grew by €19 billion in a week
In the euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More area, the cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More figures for March have not yet been published. However, according to Bloomberg, cash in circulation increased by €19 billion ($20 billion) in the third week of March, representing the steepest demand for cash since October 2008. The Financial Times on 25 March reported that ATM withdrawals had more than doubled in Germany during the previous week. “The strong increase in weekly demand seen last week is to a large extent likely to be explained by people spending more in supermarkets and shops due to uncertainty related to the coronavirus pandemic,” an ECB spokesperson said to Bloomberg. “The demand for banknotes in that week was similar to the demand in the week for Christmas.”
Not all countries have followed this pattern. In the UK, the Guardian reported on 24 March that cash usage had halved within days due to a combination of shop closures, concerns that banknotes may spread the virus and a shift to digital payments. However, the latest figures by Link, the UK ATM network show that the ATM withdrawals have declined by 27% between March 2020 and March 2019. , or 2.3 withdrawals per person.
Source: Link
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