This investigation was kickstarted by a post on WSO about how 33% of the euros in circulation are the unusable 500 euro notes and that they’re only really used by people that cant store cash in a bank account (i.e. drug dealers etc.). Well the optimist in me saw the cashless society we live in and thought, great, harder for criminals to hide their ill gotten gains. We see the rich getting richer (and not increasing the amount they carry in their wallets), the poor getting poorer, and less demand for cash in our society with card payments becoming the norm. So one would expect the amount of physical currency in circulation to be at or below its near historic highs, when adjusting for inflation and population increase. Is that what we see? Is it bollocks.
GBP: 1996: £20bn sterling, 2002 £30bn, Christmas 2012, £60bn.
EUR: 1996: NO DATA (DERP) 2002 EUR 300bn 2012 900bn ** population of euroed countries increased in this period.
** in between this period, Estonia, Slovakia, Slovenia and Cyprus joined the Euro. Total GDP added to the Eurozone was 3 cows 2 sheep and a dodgy cheque book.
USD March 2003 $683bn, 2013, $1.175trn.
Population increase in the UK was 0.86% in this period, and the US went up by 10% ish (290m to 315m). Counting the increase in Europe is hard because of the added countries, and are they really comparable etc. I’m happy to go with the range of 0-10%. Feel free to lick my numbers.
Official Inflation (the one that matters for this calc.) in the UK was between 2-3%, giving a maximum rate of 34% increase in value attributed to inflation. Similar numbers elsewhere in the world, its getting close to market close and I need to wrap this up.
The questions I can't answer
So, (1) WHY on God’s holy earth are central banks printing more physical currency, in times when demand is less for it. Got my own ideas but want to hear what the WSO base thinks first.
and (2) WHERE is it?
P.s. I got my numbers from the central banks websites stats on circulation.
Europe is still a cash society. Even today, not too many typical merchants taking cards. Credit card is mainly taken by higher-end merchants.
The US has the card norm though.
Yeah when I moved over here from Europe I was surprised at how prevalent debit/credit cards were. It is extremely convenient especially when having to carry those goddamned Euro coins.
A huge amount of stuff is unreported in Europe. The cash is sitting in institutional vaults, and the goal is to inflate away their problems much in the same way you would print more money to devalue a loan you made someone.
The idea in the US is to do this until the markets recover fully. In Europe, they're going to do this well past any recovery and then wreck the system. Also, Europe is stubbornly refusing to fix their other structural issues, so this Euro "crisis" is really just the shape of things to come.
What...you thought this was even close to over?
Partially agree with the US comment. Disagree with Europe - they haven't printed ENOUGH yet, and when Mario decides to go QE on everyone we will see the same thing as in the US. Now... Sucks if you have borrowed massively from those country (ie: Turkey); when rates go high as the US raises them, that's gonna hurt....
For the cash bit, how else are you going to pay for Mario's pizza? And not the Mario you are thinking of... Do you think he declares his cash?
speaking of 500 euro notes.. Ive got about 10 of them, is there any place I can exchange them in the us?
UFO, when you say printing money, you mean QE no? This isn't hidden inflation, this cash is expensive to produce,so i dont believe its for inflationary purposes only. Why would each of these economies need more physical currency flying around in unusable forms?
Some European countries have a thriving "shadow economy", meaning gross turnover, sell-through and capital is not reported at all. Many independent merchants (which make up a lot of market share in key sectors ie food/gastronomy, nightlife, entertainment, cafes/bars, etc) do not accept card (for obvious reasons).
we are talking about billions here.
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