Banks, gangsters and the strange resurgence of cash
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 So cash withdrawn from an ATM but put into a piggybank or under the mattress will appear here as "missing".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