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German banks are hoarding so many euros they need more vaults
- njarboe 7y agoThis problem has probably been exacerbated by the fact the the $500 euro note has not been issued since 27 April 2019[1]. I wonder if making storing euros in cash 2.5 times harder (500 versus 200 euro notes) was part of the reason the 500 euro was retired. [Edit] The legal storing of cash. The stated reason was the criminal use of cash. [1]https://en.wikipedia.org/wiki/500_euro_note https://en.wikipedia.org/wiki/500_euro_note
- H8crilA 7y ago500 euro was (and is) essentially not used for any day to day payments - i.e. the most important reason for having printed paper as money.
- njarboe 7y agoTrue. But it is nice to have large bills when buying something that costs a lot, like a used car. I recently did that in the US and if I had some $500 or $1000 bill things would have went a bit smoother at that nervous time in the transaction when you are handing over to a person a big chunk of money.
- MrRadar 7y agoWhy couldn't you use a cashier's check?
- espinchi 7y agoThat's not a thing in (most countries of) Europe any more. I was shocked when I came to the US and saw that checks are still in use
- redis_mlc 7y agoCheck and cashier's check are different things. A cashier's check is like a domestic SWIFT.
- raverbashing 7y agoExactly why it is not needed, the banking system supports transfers between banks in SEPA for free or very cheaply. Some people/business will still ask for a cashier's check though.
- kjaftaedi 7y agoThe point the person you are replying to is making is that to Europeans, checks are a thing that only exist in Hollywood movies. It's difficult to imagine in a modern world, people or institutions writing or printing something on a piece of paper, and saying, "here, this is money".
- Scoundreller 7y agoStill a thing in France, at least as of last year. Got stuck behind someone at the Carrefour (grocery store) paying with one. Ugh.
- pujjad 7y agoStill common in the UK. I know friends in Wales who can only pay by cheque because a two-signature policy applies to their bank account.
- Bayart 7y agoVery common in France for bigger transactions or guaranty deposits.
- njarboe 7y agoPeople in the US don't trust cashier's checks. For good reason. They are easily forged.
- firebird84 7y agoSome people would balk at the idea since they have bad credit and no bank account, and hence have to fork over a fee to walmart/publix/your local check cashing place in order to make it liquid. Cash works for everyone. I agree, cashiers checks are safer, but some people have reasons to prefer cash.
- t0mas88 7y agoUnless you're homeless you will have a bank account in Europe. For the simple reason that you can't really live without one. Taxes, salary, state allowance and mortgage are all done by bank transfer and nothing else.
- desas 7y agoIn the UK all big banks offer "basic" (no credit attached) free bank accounts as the government were musing placing a public service obligation on them to make it compulsory. In the UK, government benefits are paid by bank transfer.
- tiku 7y agoWe don't really use checks in Europe, at least not in the Netherlands..
- pujjad 7y agoBut in the UK we do. You can set up a bank accounts which requires two signatures, then only cheque payments are possible. Very quiant, annoying and backwards.
- Wildgoose 7y agoI am the Treasurer of a Charity we set up to keep our local Library open. We need two signatures on our cheques - but not to be "annoying" or "backwards". It's simple security to stop a rogue actor emptying our bank account!
- pujjad 7y agoYep I get that, but the artist playing at our charity festival have complaint every time about having to deal with cheques both I (treasurer) and the other finance officer have to sign. Why is it that in the 21st century we can't have a digital online two-signature policy yet have to sign a paper which signatures one easily can forge. That's backwards. We got cryptocurrencies but no way to implement a digital two-signature policy? Odd.
- mamon 7y agoBecause they are not used here since 19th century :)
- eb0la 7y agoIn Spain the bank charges you for this service (you can negotiate the amount). There is no commision for cash, but you must fill a form to tell the taxman that you are getting a more than given amount (3000€ if I remember well)
- Daniel_sk 7y agoI have never seen a check in my life :-) (EU), they are not used or supported (maybe in some special cases, but 99% of people never used a check here). Larger sums are always paid with bank-wire transfer which is free and usually fast (instant or 24 hour), smaller payments are done with debit (or credit) cards, and then small payments can be done with cash.
- majewsky 7y agoWhen I was a teenager, my mother was playing a lottery that sent out winnings as checks through the mail. She always gave those to me to cash in because I was the only one in the family who had a checking account at the local bank. Her bank did not have branch offices, so it was literally impossible for her to cash the check.
- VBprogrammer 7y agoYou tend to run into the problem that forging large notes has a much greater return on investment. People get nervous about accepting them. In the UK this definitely kicks in around the £50 mark.
- SilasX 7y agoHeh, yep, like to joke that $100 feels like a lot of money whenever you try to spend a $100 bill. I can barely fathom what it's like trying to pass a 500 EUR note.
- njarboe 7y agoIf you spend time in casinos, $100 notes flow around like water.
- vkou 7y agoCasinos are also a hotbed of money laundering.
- Iwan-Zotow 7y agoBugsy Siegel look at this with the note of approval
- tinus_hn 7y agoThe most forged notes are the smaller ones because everyone checks the large notes. You can just hand people a photocopy of a €20 euro bill with a hologram sticker and if it’s in a dark bar you’ll probably get to keep the change.
- idiocratic 7y agoIn many countries in Europe you can't use cash for large sums. We generally use bank transfers to buy cars.
- timlin 7y agoI'm genuinely curious. Do you need to go to a physical bank location to do this? How do you buy a car in the evening or a Saturday afternoon, when a bank is closed?
- pornel 7y agoIn the UK online bank transfers work 24/7 and clear in seconds (all banks are required by law to have APIs for fast inter-bank transfers).
- tialaramex 7y agoThey're not legally required to be instant, but they usually are. The "ambition" set out legally was half a day, if your transaction is initiated in the morning it should clear that afternoon. It's just that in practice instantly is the realisation of this ambition when things work. And I don't think there's any API requirement, the regulation just explains the consumer experience, that you can transfer relatively small amounts of money (enough for a nice car, not enough for most houses) fast ("Faster Payments" is the name given to this feature), and doesn't dictate how. For large transactions transfer for a fee already existed. CHAPS will move much larger sums of money (it's typically used to buy property so certainly millions but perhaps more) for a modest fee. You wouldn't want that fee on your weekly groceries, but when you just bought a house who cares? Last I looked the backend for Faster Payments wasn't actually built. The big banks decided instead "temporarily" to just trust each other. If Bank A says Cathy sent Mike £5000 then Bank B where Mike's account is will credit Mike £5000 (probably instantly), presumably Bank A will reduce Cathy's account by £5000 and the two banks agree they'll settle things at the end of the day. This is only scary if Bank A might not actually have that £5000 to give Bank B at the end of the day when it's settled, which in principle should never happen under current financial regulations.
- 7y ago
- astura 7y agoThe best way to pay for a used cari the US (assuming you mean from an unknown private seller, not a dealer or family) is probably for the buyer and seller to go to the buyer's bank together and have the buyer get a cashier's check in front of the seller and exchange title/keys for cashier's check right then and there. It eliminates the risk of a forged cashier's check and the need to carry large amounts of cash.
- Frost1x 7y agoIsn't the point of a cashier's check to avoid this entire process? The note should be associated to a bank and there should be multiple independent information providers that have contact information for that bank you can use to verify the information. Obviously, using verification information such as a phone number from the note itself is susceptible to scamming, but discovering the contact information through multiple reputable external sources then contacting the bank from this information has extremely low risk of being scammed.
- nitrogen 7y agoThat still requires the buyer to hand over the check before they receive the keys and title.
- jotm 7y agoI used one at Real, think I bought like 30 Euros worth of stuff. They did look at it for a bit, but accepted it without complaint. Amazing compared to a 50 pound note in England :D
- TremendousJudge 7y agoAccording to that same article, the reason for retiring the note was because the people who benefited the most from its existence are criminals, who need to do their business in cash -- the fewer notes, the easier for them. That includes storage, I guess. Still, I'm personally not in the eurozone, but in general terms for the end user high-denomination notes are not very useful unless you're gonna store them under your bed (and governments don't like this, they'd rather everybody be bancarized). Actually using them to buy things is a pain, since most businesses won't accept them. Having one in your wallet is a problem that you have to take care of, instead of just money
- njarboe 7y agoInteresting, I don't see any mention retiring the note because of criminal use or anything about the 500 note at all. Is Bloomberb A/B testing the content of articles now? Would not be surprised, but it would be a disturbing trend.
- kfichter 7y agoCommenter was referring to the Wikipedia article, their wording was a little confusing though.
- deleted 7y ago[deleted]
- throwawaybbb 7y agoThe same people who benefit from encryption if govts are to be believed. If cash keeps being as unwieldy as it has become, a $100 note today is worth about what a $10 note was worth in 1920, people will just stop using govt back cash and use gold or art instead. Monero looks like it's the first large scale crypto to get inflation and anonymity at least partly right.
- decentralised 7y agoI've been in the eurozone since it started.. only ever saw 500 euro bills being exchanged in casinos.
- hirsin 7y agoIndeed it was. Even now the 200 Euro note is the best for laundering and transportation since it's the highest value bill in common circulation (per Fed employee)
- 1337biz 7y agoWell, I am no expert but let me play the futurist here. After they killed the 200 Euro note it is going to be the 100 Euro note that is going to be used by those damn criminals! It is in essence part of the same eradicating rights movement that is fighting against anonymity in the internet. "Hey look, there are some criminals benefiting from it so let's kill it."
- mistrial9 7y agoagree
- hirsin 7y agoThere are valid reasons to have anonymity on the internet - plenty of them. It's really hard for me to grok the intrinsic value and human right of carrying a 200 note instead of two hundreds. If I'm gift giving, maybe, but frankly I can't stand getting hundreds as gifts, they're a pain to spend and just cause more work for me.
- 1337biz 7y agoI am against giving up any rights of individual freedom whatever so small the real value thereof is. I see it as a matter of gradually eroding the right of anonymous transaction/cash from the top and the bottom. They went after the 500 Euro bill and currently are on the way to kill the 1 and 2 cent coins. In 5 years they will go after the 200 Euro bill and so on.
- dx034 7y agoIn the UK, £20 notes are the highest commonly used. That doesn't mean they get rid of cash. There are just very, very few cases where you need that much cash that £20 notes are impracticable.
- rwmj 7y agoIf this was an actual problem, couldn't the ECB issue (eg) €1 million bearer bonds to the banks that have to store cash (these notes wouldn't need to go into general circulation). In fact, why don't they do that?
- goodcanadian 7y agoThe short answer is that they don't want to make it easy for banks to hold cash; they want the banks to loan the money out (ideally) or deposit it with the European Central Bank where they will have to pay for the privilege in the form of negative interest rates (which is what the banks are trying to avoid by holding the cash).
- reaperducer 7y agoThis problem has probably been exacerbated by the fact the the $500 euro note has not been issued since 27 April 2019 The United States used to print $100,000 notes. They were only available to banks for moving from bank to bank, I believe, and so were useful for reducing the number of notes that needed to be stored by banks, while keeping them out of the hands of criminals.
- ianlevesque 7y ago> They were only available to banks [...] while keeping them out of the hands of criminals. So they were discontinued when they couldn't find any non-criminal bankers?
- lliamander 7y agoSo, when they formed the Fed?
- njarboe 7y agoThe US also had lower denomination bills like the $500 and $1000 until 1969. They were not in much use then but I think that they could have useful legal uses today considering all of the inflation that happened since 1969. The $500 now would be about like $75 in the 1960's.
- Frost1x 7y agoI'm trying to think of places that would want to accept $500 to $1000 notes when many places won't even accept a $50 or $100 and consider them "large bills." While I agree with your premise that inflation makes $500-1,000 notes practical from the standpoint of modern expenses, businesses I interact with tend to prefer a third party to verify payment (CC merchant, cashiers check, etc.). Cash is dying and although I love convenience, I'm not entirely sure that's a good thing.
- jimmaswell 7y agoCash will continue to be #1 for Craigslist/yard sale-type transactions for a long time I'd say.
- n0mad01 7y agothe real reason why the 500 euro bill has been revoked was that for storing physical money (for banks, in those quantities) would become more expensive in order for the ECB to lower the interest/deposit rate. next thing will be 200 euro bills revoked, then the base rate can go down to around -1%.
- 3fe9a03ccd14ca5 7y agoThis really is the endgame in ZIRP. Removing the ability to store cash is the only way to effectively get rates into negative territory.
- chii 7y agoWhich is why people should be very much against cashless rules.
- wolfgke 7y agoIn Germany, they are. As far as I am aware, among all the Euro countries, Germans are particularly fond of cash. Since I work in an area that is related to finance (think in the direction of planning/writing business applications for the banking sector), I seriously very often get asked (in Germany) whether one should cash out all the money from the bank account and store it in a strong private safe to avoid the negative interest of the banks that are in the wind.
- chii 7y agoThere's a possibility that Deutchbank is bleeding money and the only way for the govt to bail it out without directly inject money is to go cashless, and let Deutchbank charge negative interest.
- dcolkitt 7y agoI mean, there's an easier way to set a negative interest rate on cash. Periodically select X% of the circulating serial numbers and declare that they're no longer valid currency. In effect this makes X% of cash "burn off" every period, and allows the monetary authority to set any negative effective interest rate that they want. This is by no means an endorsement of negative rates. But if you're going to go down that road, it's a better scheme than just trying to make holding cash too much of a pain in the ass.
- Scoundreller 7y agoMeanwhile, Canada went in the opposite direction. Its polymer notes were 30% thinner than its paper predecessors.
- Amarok 7y agoI was storing 500 euro bills under my bed during the 08 crisis. When I moved to the UK, Barclays was the only non shady place that accepted them.
- cosmodisk 7y ago€500 used to be called Bin Laden. Obviously everyone eventually asks: why? Because everyone knows it exists,yet nobody has ever seen one. For the absolutely majority of Europeans it's a pretty useless note.
- Despegar 7y agoThe crazy thing is that Germany is killing their own banks. They refuse to run fiscal deficits while at the same time they criticize the ECB for lowering rates and hurting the German Saver, when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years.
- cwperkins 7y agoBe careful what you wish for. I agree with Stieglitz that the Troika has historically not chosen the best path for crisis countries by implementing austerity. My fear with using Fiscal Policy and running deficits is that it is hard for a politician to win a campaign fighting for austerity if and when the debt binge becomes to great. From my own understanding, that is why monetary policy is strongly preferred because it’s easier to roll back but Europe is at their end of Monetary policy. I wish I understood MMT better, it’s something discussed in the circles of parliament and congress but I don’t think the average joe is aware.
- Gustomaximus 7y agoVery generally, my gripe with MMT is maybe it could work if well run. I'm not convinced but let's say it's possible. Next step, can we trust politicions to run the program effectively? I suspect they would always try to squeeze more out than practical that would lead to issues... And that's if it would work in the first place. I'd like to see some countries try it and prove/disprove, just not mine first.
- marriedWpt 7y agoHasn't Japan already gone through the course?
- Gustomaximus 7y agoWhat course? Would you say they are running MMT, or just closer to than other countries. They have embraced increased holdings for ~6 years. Def the petri-dish but still seems early days.
- H8crilA 7y agoNegative interest rates are long time lethal to financial institutions such as banks and insurance companies. Hoarding printed paper is just a hilarious side effect, but the reality is that under negative rates the financial institutions are, at best, delaying their inevitable bankruptcy. https://moneyandmarkets.com/jeffrey-gundlach-negative-interest-rates/ https://moneyandmarkets.com/jeffrey-gundlach-negative-intere...
- deleted 7y ago[deleted]
- marriedWpt 7y agoThis makes sense to me, but I don't see democratic countries able to stop themselves before it's too late. What comes after? This exact problem is why I liked Bitcoin a few years ago. Although with the scaling issues, it seems less useful than I expected.
- listsfrin 7y agoDemocratic in what sense? I don't think any country asks their citizens what about their financial issues.
- qtplatypus 7y agoAll political parties have an economic policy and the voters try to elect governments that reflect their views.
- companyhen 7y agoDo you think raising the block size would create more issues? Although it seems BTC is committed to layer 2 scaling solutions.
- rabuse 7y agoRaising the block size creates numerous issues, especially for nodes running on consumer systems with limited storage (which is most), and the network starts to become more centralized. We don't want the majority of nodes becoming SPV clients/pruned nodes, due to full blockchain storage costs.
- mrsun 7y agoAdditionally, the cash limit to anonymously buy gold is now 2.000 Euros (since Jan 2020). https://news.bitcoin.com/germans-rush-to-buy-gold-as-draft-bill-threatens-to-restrict-purchases/ https://news.bitcoin.com/germans-rush-to-buy-gold-as-draft-b... You need a lot more space to store 10.000 € in cash than in gold.
- metalliqaz 7y agowhy would banks care if it is anonymous?
- mrsun 7y agobanks don't care but the cash owners do. If you have 10.000 euros in cash and buy gold (in order to save space in the vault) the transaction will be registered. The government gets all details (name, date, amount etc). Instead if you put the 10.000 euros directly in the vault nothing will be tracked.
- brokensegue 7y agoyou seem confused, did you read the article? I don't know about German laws but if you deposit $10k in a US bank you are definitely tracked and not anonymous. Also, no "cash owner" would buy gold to save vault space. The incentives don't make sense.
- mrsun 7y agoOne of the main points is mentioned in the article: > Germans were already well known for their love of physical money and data privacy. I think the most important point here is privacy. If you deposit $10k into a bank account, of course you are tracked. But if you put the $10k into a bank vault you are not tracked. > Also, no "cash owner" would buy gold to save vault space. Saving vault space is only one of the reasons. Gold is more stable than cash.
- brokensegue 7y ago
- Turing_Machine 7y agoThere's also a long-standing rumor that the Germans have warehouses full of Deutschmark notes all printed up and ready to roll out, in the event of a currency Armageddon with the Euro.
- ginko 7y agoSurely the banks have to declare how much cash they're holding. Couldn't they just be forced to pay negative interest on that? ..or give the money to someone else for a while so they can do something with it.
- TheSoftwareGuy 7y ago>Surely the banks have to declare how much cash they're holding. Couldn't they just be forced to pay negative interest on that? Could they? With appropriate legislation/government action, of course. >..or give the money to someone else for a while so they can do something with it. You are talking about forcing them to invest the money. And what happens if that person cannot pay back what was lent to them? If there were any available investments that were safe enough, the banks would be tripping over each other to make that investment, believe me. Hoarding money costs the bank money. Investing it is not only free, but it turns their money into more money. If you were to force them to make unsafe investments, then that risk is essentially passed onto the people who deposited their money in that bank, in the form of potentially not being able to withdraw their money.
- OscarCunningham 7y agoCan someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.
- rusk 7y agoWell, the simple answer is that they’re actively fighting inflation for political reasons.
- vidanay 7y agoI'm not so sure about that RE Google share price. Even if they were to magically slice 20% of the share price, it would immediately start a buying rally. Anything that would have a permanent effect on the share price would probably have to threaten the very existence of the company.
- Tenoke 7y agoIt's not hard doing it in an absolute sense. E.g. drop a bomb on yourself. It's hard doing it without messing everything else so much as to not be worth it.
- jldugger 7y agoI suspect the problem is creating only a little bit of inflation. Hyperinflation is easy, just ask the Weimar republic.
- Angostura 7y agoI don't see why Germany doesn't handle it the same way as the Bank of England where the chief cashier signs special notes called 'Giants' worth £1,000,000 and 'Titans' worth £100,000,000. These are obviously only used for inter-bank transactions.
- epanchin 7y agoWouldn’t that undermine the point of negative rates? Better to just charge interest on cash stored at banks.
- odyssey7 7y agoThe US has considered doing this for other reasons. It’s an interesting idea. https://en.m.wikipedia.org/wiki/Trillion-dollar_coin https://en.m.wikipedia.org/wiki/Trillion-dollar_coin
- goodcanadian 7y agoThe short answer is that they don't want to make it easy for banks to hold cash; they want the banks to loan the money out (ideally) or deposit it with the European Central Bank where they will have to pay for the privilege in the form of negative interest rates (which is what the banks are trying to avoid by holding the cash).
- dontbenebby 7y agoLarge notes were used like this in America as well - up until 1934 we had up to 10k notes. It's my understanding the larger ones were mostly used for storage or transfer? https://en.wikipedia.org/wiki/Federal_Reserve_Note#Large-size_notes https://en.wikipedia.org/wiki/Federal_Reserve_Note#Large-siz...
- dickjocke 7y agoWhy do they need paper money anyway? Is there something more legitimate about a piece of paper with many 0s on it vs redundant electronic storage of record?
- boublepop 7y ago
- BenoitEssiambre 7y agoThis is a sure sign that government paper is crowding out private investment and destroying the eurozone economy. This is solvable through higher inflation. https://medium.com/@b.essiambre/the-world-deserves-a-pay-raise-302f25efd82a?source=friends_link&sk=cb180b2cf186b263b6c6c70ad29bc36e https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...
- jotm 7y agoWhy in the world does Germany not have a decent VC/investment industry? Seems like some companies and people are loaded with cash but they'd rather keep it in a bank than risk it on a new startup. You're not going to get many innovative startups doing that...
- ktpsns 7y agoThe standard explanation to this question is that Germans are risk-averse. People don't trust stocks but better want to save their money in a savings bank book. (That won't cover the whole situation, it's rather a two sentence summary)
- 1337biz 7y agoHistoric risk aversion. The two wars, the DDR, the Eurozone. Germans have experienced over and over again that they can't count on the government to make good decisions for their money. I know quite a few who try to keep their bank balance always around a zero and invest the money they have in other forms of storage they feel more ownership about (i.e. real estate).
- Apofis 7y agoWait, the Germans are hoarding money again? Should I be alarmed? The UK just exited the EU.
- IanDrake 7y agoMoney is a commodity, but you don't want it to behave like one. That's where fiat currency comes in. Inflation, or at least the threat of it, prevents hoarding. It has a realistic and useful effect on value in that it makes money decay over time.
- linuxlizard 7y agoI have plenty of space in my basement. Call me. Low rates!
- robocat 7y agoIt's because they are storing zero euro notes: https://www.thelocal.de/20180418/karl-marxs-birth-city-sells-zero-euro-bills-for-his-200th-birthday https://www.thelocal.de/20180418/karl-marxs-birth-city-sells...
- iambateman 7y agoThis may be a stupid question...but is there a paper dollar corresponding to every dollar I have in my bank account? I always assumed that some of the currency issued by governments was exclusively digital.
- pixl97 7y agoNo, most is digital, but there have been some interesting attempts https://en.m.wikipedia.org/wiki/Trillion-dollar_coin https://en.m.wikipedia.org/wiki/Trillion-dollar_coin
- jdc 7y agoMost banks are required to keep 10% of the deposits https://www.investopedia.com/terms/f/fractionalreservebanking.asp https://www.investopedia.com/terms/f/fractionalreservebankin...
- rabuse 7y agoThe accounting is tied to the Federal Reserve by mere bookkeeping for the bulk of it. If the banks are short on cash, they have the fed just print it for them.
- iambateman 7y agoThis is what I imagined and would seem to prevent the vault-size problem. Interesting.
- marcell 7y agoYou don’t have dollars in your bank account, you have your banks promise to give you dollar if you ask.
- deleted 7y ago[deleted]
- bawana 7y agoI guess that’s why the smart money in the US is buying stock in banks and financial corps. They are expecting euros to leave the EU and invest in US financial products
- iagooar 7y agoOh, I still recall my time in Switzerland, where you could walk into any store and pay with a 1000 CHF bill and nobody would even look at you.
- smabie 7y agoWhy don’t they hold T-notes and accept the eurodollar exposure? Seems better than cash, imo.