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There 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 f
by rsj_hn 5y ago
There 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 So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missing".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.
https://fred.stlouisfed.org/series/WCURCIR https://fred.stlouisfed.org/series/WCURCIR
- Arbalest 5y agoIf we read into this article as pushing an agenda, then the agenda is probably written here. https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/ https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-nega...
- ausername42027 5y agoDownplaying is being "only" 2% of currency in circulation is really strange. It is 2% of currency in circulation of the world's largest economy and the de facto international currency. The US accounts for almost 16% of the GLOBAL GDP when adjusted for PPP. I guess people just love to be contrarians on HN.
- bombcar 5y agoIt’s $166 per person in the USA. The horror.
- is_true 5y agoArgentinians have a lot of cash that they (we) use as an edge against inflation
- deleted 5y ago[deleted]
- anonporridge 5y agoI assume you mean USD cash to hedge against inflation of Argentinian pesos?
- tomrod 5y agoNot OP, but your assumption is valid with a high degree of confidence since holding a currency experiencing inflation is a net negative. USD is commonly used as a store of value in those situations.
- anonporridge 5y agoThe 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.
- mbg721 5y agoPhysical cash that buys less and less with each passing day is not as useful, though.
- lazide 5y agoIf you don’t get paid interest at a bank, and no brokerage is going to take you on (or you don’t trust them), then what else are your options?
- posnet 5y agoI mean isn't that the reason preppers love gold/silver bullion?
- lazide 5y agoYup, though the minimum ‘buy in’ per unit without getting raked over the coals with high spread products is too high for many people. If you’re trying to set aside $20/wk, silver is terrible and good luck with Gold.
- dylan604 5y agoi've never understood how this would work in these doomsday scenarios. are people going to walk around with scales to weigh the gold for every transaction as well as test the purity of the gold? are they going to mint their own coins? I just don't see how it's supposed to work
- chiefalchemist 5y ago50,000 million? Yes, that's broader economy chump change. But, toss it in a suit case, move it off shore, and the magnitude increases (especially if it's a corruption tool). I think the question is: how does the current % size up historically? (I wasn't able to read the whole article.)
- cptaj 5y agoI live in Venezuela and we've had forex controls for 2 decades now. Our currency has also depreciated massively over the years to the point of being useless. We've unofficially dollarized a lot of cash operations so I bet a bunch of it is here. Cuba and Argentina have similar forex controls. This is probably the case all over the world.
- razius 5y agoI always wondered, how is the unofficial USD rate set there? Just day to day or do you have an app or something that the people follow?
- inopinatus 5y ago> There is a lot of rumor and speculation about very benign things. There is certainly misrepresentation and rumour-mongering in these comments, but not in the article, and there's nothing benign about international money laundering, or more precisely, nothing benign about the people it enables. > $50 Billion in cash is basically nothing. It's like 2% of currency in circulation. This is very far from the numbers quoted in the article, which shows two thirds (£50bn) of all British pounds sterling banknotes (£75bn) being unaccounted for, and then similarly one-half of all Euros apparently circulating outside the eurozone. This article wasn't written by, or from the perspective of, Americans. There's a brief mention, though - $7,000 per US citizen is in circulation. Somewhere. > this whole article is complaining There are no complaints registered in the article, unless you count the cash mule's plaintive wail about how heavy the suitcase was. This article is a careful discussion about folks in authority seeming unburdened by the discrepancy. > raise interest rates and increase law and order Parochialism doesn't solve global issues.
- tristor 5y agoOne thing that's also benign but not mentioned by the grandparent is that any economy which has considerable foreign travelers passing through will likely end up losing some cash. I have two pint glasses sitting on my desk, one for coins, the other for bills, they are literally packed full of money from my various travels. Last time I checked, I had almost 300 euros in there and I haven't been in the Eurozone in quite some time (pandemic notwithstanding). I'm not sure if others are like me, but usually I just get cash from an ATM and pay the conversion fee but I refuse to convert back because the money changers at the train stations and airports rip you even harder than the ATM does. It just rubs me the wrong way to take it both coming and going on the conversion. So I keep the bills, and at worst case they're souvenirs.
- inopinatus 5y agoI too have a drawer of various currencies, some of them even since retired, or issued by governments/nations that no longer exist. However, given that international travel took a nosedive in the last 18 months whilst banknote production continued to stampede, I'd have to suggest that hoarding by globetrotters doesn't account for any current discrepancy in production vs use in observable trade.
- TheBobinator 5y agoAlmost all US banks have had upside down Texas ratios since 2000. Used to be savings accounts paid the rate of inflation, but not paying inflation and driving investments into riskier classes is the way they are driving revenue to pay off their bad debts. With covid, the likelihood of bank failures has risen considerably as the savings money is drying up or moving out of cities and investment risks have raised considerably. Historically, whenever banks got systemically over-levered and they try to avoid a systemic banking collapse, they come for the commoners assets. Last time around they did gold confisaction. I remember in 08 they were talking about confiscating 401k money into the stock market. This is no different. This is a creepy article full of trite anecdotes and observational BS that demonizes anyone that uses cash as a drug dealer or sex trafficker and doesn't mention the root issue.
- chaganated 5y agofirst really clear-minded reply in this thread... check profile... -8. disgusting. my primary regret about going into computers is that i have to keep tabs on this soul-sucking nerd groupthink circle-jerk.
- EastOfTruth 5y ago> So this whole article is complaining that 2% of currency is not circulating. And 40% of US dollars in existence were printed in the last 12 months: https://techstartups.com/2021/05/22/40-us-dollars-existence-printed-last-12-months-america-repeating-mistake-1921-weimar-germany/ https://techstartups.com/2021/05/22/40-us-dollars-existence-...
- criddell 5y ago> Instead of spending the money on food, savings, or paying off debts, some people invested their stimulus checks in stocks (GameStop, etc.), and cryptocurrencies like bitcoins further driving up their prices. I've never thought about rising stock prices as inflation before.
- EastOfTruth 5y agoI think that we have some artificial inflation because of supply chain issues and all cargo ships sitting in the Pacific ocean waiting to be unloaded. But I don't see why stock prices should not raise with everything else.
- southerntofu 5y ago> A lot of people find it prudent to have a buffer of cash Cash is always more trustworthy than a bank, if you can ensure its safety. Many people during the greek "crisis" (eg. when the Greek government took money from the people to distribute to the foreign Troïka under the pretext of a misrepresented "debt") wish they had not stored their money in banks. > 2. Crime. Sure, crime is conducted in cash I don't have stats, but i think you'd be surprised how much of crime does not use cash. I mean sure, drug trafficking probably involves cash at all levels, but the most serious crimes committed by people in power don't. These people bank-wire funds to remote accounts, as exemplified in the Pandora (and previous) leaks. Also worth pointing out, cash is the money of the poor. Even when you're too poor/indebted for banks to open an account for you, you can still handle cash daily to survive. Even when you have a bank account, you can usually withdraw your cash before being seized, because money seizures usually take at least a day. So, say your corrupt government/justice has indebted you to a boss/landowner for incredible sums: even if you earn your wage via bank transfer, keeping it in cash is your only option to avoid feeding the insanely-rich and eating dirt yourself.
- bogota 5y agoThe economist has been killing me for a long time. They use to have what I thought were good articles or maybe i was just less informed although I don’t think that has changed in the past 2 years when i noticed a huge drop in quality. If anyone has any good news sources please let me know. The economist was the last thing i was reading before it stopped putting out quality content.
- bainsfather 5y agoI know what you mean. In my case also, I think it is a combination of me being better informed about the world and the economist declining somewhat over time. BUT I started reading it 25 years ago, and still do read it a bit. In terms of other news sources - I have no great advice. Here in the uk, I read the Financial Times - it is also rather international - maybe have a look at it. I would say that it is ok rather than great - but it is nice to get your news from more than one place. Private Eye is excellent, but mainly just for a subset of uk news. I would like to have one "go-to" news source that I could rely on. But that is apparently not possible. So I read a few different things, and try to judge from their different stories what is really going on. Interestingly, I find that hn is a good source of quality information and insight, although it (of course) doesn't cover everything that I want to know about.