Posts tagged 'Central Banking'

It really is all about the Benjamins

Here’s an interesting little side note from Joseph Abate at Barclays’ Global Rates team last week on the subject of rising demand for paper money:

Despite the attention the bitcoin and other electronic payments attract, the demand for old-fashioned paper money is surprisingly robust. Paper money is growing at a 7% annual rate, reflecting non-US demand and the $100 bill’s role as a store of value.

• Growth in currency demand has cooled since early 2012, yet it remains considerably faster than nominal consumption.

Much of the demand for US currency results from its use as a stable store of value, which is reflected in high per capita holdings and its use abroad.

• Super-low rates on highly liquid assets such as money funds and checking account balances have meant that the opportunity cost of holding currency is low.

• Currency growth will determine how quickly the Fed’s balance sheet normalizes after it stops buying assets and re-investing maturing securities. We expect the precautionary demand and the higher opportunity costs to slow annual growth to 3% or less.

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