Banks, gangsters and the strange resurgence of cash
There is a lot of rumor and speculation about very benign things.<p>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 So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as &quot;missing&quot;. If you want to change the situation, then raise interest rates and increase law and order.<p>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&#x27;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&#x27;t think there has been a material increase in organized crime, so I would think household precautionary savings is the reason.<p>3. Let&#x27;s get some perspective. $50 Billion in cash is basically nothing. It&#x27;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.<p><a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WCURCIR" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;WCURCIR</a>