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Cash is King
One thing you might expect in the midst of a bank confidence crisis (aside from a spike in mattress sales) is a spike in currency demand. Yeah, the UK's got that, but really, it is not about confidence. Promise.
Mr Bailey, who is also executive director for banking services at the Bank, said that low interest rates were another possible explanation.
The total value of £50 notes in circulation has risen to £9bn from £7bn since the summer of 2007, he said in a speech yesterday. He said that circulation picked up from the onset of the financial crisis, and rose more sharply still from last autumn, in the wake of the collapse of Lehman Brothers.
"Two features of the current situation strike me as most relevant in explaining this development: first, lower levels of public confidence in the banking system and second, low interest rates," he said.
We fail to see the import of the precise cause of cash hoarding. Dismal interest rates or bank panic, the result is the same. Less cash on hand for banks to chalk up in the asset column. Attenuated bank profits around the corner. A bigger bite for inflation if (when?) it shows its face. Nothing to see here.
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Can anyone imagine the horror if, similar to the Argentine crisis of 2001, you visit the ATM but there is no money? Talk about riots....
What are you talking about??? I already go to the ATM, and there's no money. Only Federal Reserve Notes.
+10
Sock drawers everywhere are bulging with cash. Or in the case of the UK, stocking drawers. Under the mattress is so yesterday.
Now a days, you bundle up a wad of cash and stuff it into a balled up pair of socks (stockings) for quick and easy retrieval if the house is burning or the wife is chasing you.
At least that's what my adult son informs me is the Gold standard (pun intended) these days in America, at least with the under 30 set.
"Under the mattress is so yesterday." LMAO!!
Um, you are aware that we call them socks too, right? I mean, no doubt some people in Britain do wear stockings - I did so myself when playing Captain Hook in a student production of Peter Pan - but I don't suppose the percentage is noticeably different to that in any other Western nation.
My British attorney assures me they are called stockings. Of course, my British attorney is nearly 65 so that might have something to do with it.
But I was having some fun here, no more, no less. My apologies if I stepped on some toes.
no problem old chap.
Distrust of virtual currency. Awareness
that access to virtual currency can be
removed at any time by the whim of the
powers that be. Zip lock bag in your
cupboard behind your emergency food.
...or zip lock bag in a can of emergency food with a false
bottom!
Funny you mention this.
I have socks stuffed with Benjamins and Hamiltons in my drawer, mason jars filled with pennies, nickels dimes and quarters, besides the physical Au and Ag.
Only things we keep at the CU are what we need on the debit plastic for transactions.
TPTB can shut down the ATMS and freeze the debit/cards at anytime. Why take the chance?
Well since the Euro is becoming the choice for drug cartels...
Smugglers and launderers use €500 notes instead of $100 bills to save space
International drug cartels have abandoned the US dollar for high denomination euros to launder millions in illegal profits, Europol has revealed. The gangs no longer use $100 bills because €500 notes – the largest denomination of euro – take up less room when transporting large amounts of cash across the world.
In a single consignment on a British Airways plane bound for London from the United States, US police found £11m worth of drug profits in €500 bills. The Colombian and Mexican cartels' conversion to the European currency is even acknowledged in popular culture: American rapper Jay-Z's video for his single, Blue Magic, features a suitcase full of €500 notes as he sings about "the kilo business".
Rob Wainwright, director of Europol, said last week police forces across continental Europe were tracking the movements of smuggled and laundered euros and had traced much of it back to large drug gangs.
"We have seen examples of high denomination notes hidden in cereal packets, tyres, concealed compartments in lorries, and so on," he said.
The scale of the smuggling operation was revealed in figures from the Colombian National Directorate. Only $300,000 worth of euros were declared as entering Colombia between January and June 2007, but over $551m in euros left the country. Once in Europe, the notes can be exchanged for dollars.
Oops, didn't see that you'd already posted this. Nicely played.
I am Chumbawamba.
Legalize drugs today & watch the world economy implode tomorrow.
This will soon be corrected with the introduction of the US $1,000 bill, replete with a picture of a bearded Baby Ben looking you in the eye, daring you to claim it's no better than toilet paper.
I'd be down for $1k bills as long as it has Ronald Reagan on it. Its all his fault. Well....maybe not...but all those crazy right wingers would rather see RR on the bill than the original Grover Cleveland.
"Once in Europe, the notes can be exchanged for dollars."
why would they need to be exchanged for dollars once in europe?
Because like Visa, dollar are accepted everywhere. They simply use the 500 Euro notes because they are of a bigger denomination, not because they are stronger or better.
Ultimately, they want the dollars for easy conversion into washed and usable funds. Until it no longer is, the dollar remains KING of the hill.
Go to rural France and try paying your restaurant bill - sorry, check - in dollars. Or pretty much anywhere in Western Europe, frankly - but I'd expect the French to be extra rude about it. Because, you know, they are.
i don't know CD, can't think of one country on the planet outside of the US that would take dollars and not euros. especially countries where it's easier to scrub your cash without detection. seems like an unnecessary risk & effort to convert back to dollars unless you're trying to bring that cash back into the US.
perhaps that final throwaway line was just a bit of spin to throw people off the scent that the dolla is no longer the currency of choice in the upscale black market?
I'm combining two replies here. We aren't talking about restaurant checks or bills. We are talking millions of dollars here and yes, they are trying to get it back to the US. Or they are trying to get it into other countries to be used to pay for oil, which is still trading most in dollars.
Which means we are talking about sovereign countries involved in the drug trade. Imagine that.
well yes, since you're speaking on that level, all hail the citi that never sleeps...
speaking of the coca-oil connection, didya know that petrol is used for cocaine production?
http://www.petroleumworld.com/sunopf08060701.htm
Cash is king, indeed, that of course depends on what kind of cash is that: http://www.youtube.com/watch?v=ACV0pAmWTHE
Just be sure you are not making a serious attempt to compete with the almighty dollar!
Don't make any coinage with real silver or gold content or you will go to jail!
Remember the LIBERTY DOLLAR!
http://en.wikipedia.org/wiki/Liberty_Dollar
Is this all of the "cash on the sidelines". ;-)
I remember my Grandfather talking to me about the Great Depression of the 1930s when I was a child some 60 years ago. He gave me this sound advice: "remember Jonas, in a depression, cash is king." I had not then nor have not now any reason to disbelieve him.
Okay, I more or less agree this time, but looking back at most of the conventional wisdom imparted to me by my grandparents and my parents and I have come to realize that none of it has held up at all. In fact, I would go as far to say that doing the opposite of what my dad said often worked out the best for me. You have to break out of the old ways of thinking and forge your own answers in life. "Cash is king" until it isn't. Gold is a store of value, until it isn't...
The advice I got depended on when the grandparents were advising. Was it when they were buying railroads on margin in the late 20's, of standing in bread lines in the late 30's?
Gold's always been a store of value; it's just that it stores more value at some times and less value others.
Grampa musta forgot the day when the dollar was $20.67 and the next it was $35/oz
Refresh my memory - how much gold does $35 buy now? Seem to recall that a silver dollar used to be a dollar...how many dollars you gotta fork over to get one these days?
The Dollar has officially hyperinflated in the drug world:
http://www.guardian.co.uk/global/2009/dec/06/drug-cartels-eruos-dollars-...
Drug runners have given up the US $100 in favor of the 500 euro note. The article says it's so that they don't have to carry so much cash. Bullshit. It's because the drug lords aren't stupid. They aren't going to hold their profits in a losing currency.
I am Chumbawamba.
Yeah... well, we'll see what happens to the Euro soon enough...
This crap about Germany being strong enough to carry the PIGS nations (Portugal, Ireland, Greece and Spain) is absurd.
Same shit, different continent.
Its 12:45. Ramp-up initiated..looks like Bernanke opening his mouth again is getting everyone excited again.
Notice the use of the word "hoarding" in the Telegraph's article to describe those who are keeping their own money in paper form rather than letting the banks reflect it as digital entries in accounts --- as if by keeping and using your own cash was somehow depriving other people of having their own cash. In a full reserve system, it would be impossible to "hoard" cash, so the use of "hoarding" actually exposes the heart of the fraud at a non-fractional reserve system.
Everyone taking and keeping as much cash out of banks as possible and using cash for transactions instead of debit and credit cards is one way to fight the bastards, because it forces the treasuries or central banks to actually print more bills to meet the demands for in circulation currency, thereby actually forcing them to put cash in from the bottom up.
Jeff S
"Hoarding" is just saving by someone else.
Especially of something that you want.
cash is dead. by gold!
This is the dumbest post I have read on ZH in a long time.
A couple quibbles
<Less cash on hand for banks to chalk up in the asset column.>
Deposits are classified as liabilities. It is the loans made from those deposits that count as the assets. ZRIP policies can take depositors out that lending loop as central banks can step in and provide the capital for lending. This is likely a big part of why banks have charged all kinds of fees for deposits, unless you're producing a stream of revenue for them (and that ain't coming from your deposits being lent out) then you are a liability.
Also my informal poll of a few brits say they've yet to hear of people holding onto extra cash as any part of conscious decision making. Yet there is a clear shift in mentality on that side of the pond endemic of deflation. Instead of taking extra cash on hand from refinancing and mortgage relief, the brits are largely paying down their debts instead.
Funny how something that seems so common sense and beneficial to an individual is fretted over by economists as potentially stifling recovery.
"Lloyds Banking Group – which includes the UK's largest lender, the Halifax – the Nationwide Building Society, Abbey, Barclays, HSBC, the Co-operative Bank and others have all told this newspaper that borrowers are taking the opportunity to pay off their mortgage debts rather than spend any extra cash, the opposite of what the Bank and the Treasury want."
http://www.independent.co.uk/news/business/news/thrifty-britons-cash-in-on-low-interest-rates-and-falling-bills-1833082.html
"A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer."
http://en.wikipedia.org/wiki/Deposit_account
Not necessarily. I think BB is stuck now more than before. The threat of gold has become very real. If he opens his mouth to prop up the market,then gold is going up by probably more than the market. And the next thing you know,people are converting all their holdings to gold. So the previous triangel,thet prevented the market form going beuond the 950 back in May,spx-tb-dxy,has added one dimension to it,and that is gold which is a lot safer and more beautiful thaan the rest. So I believe that things will be on hold for a while,and back to the drawing board to solve the following equation:spx=up,tb=up(price),dxy=down,AU=down. If anyhere have a solution for that formula,then I am sure he could command millions for his solution from the fed(they could even give him his compensation in GS stocks)...
Sitting on a pile of cash that is slowly losing value, either by inflation or devaluation accomplishes one thing - sit long enough and you find yourself sitting on your ass right at ground level!
I agree BUT to the average wage slave, who lives from paycheck to paycheck, cash is King and inflation means nothing to them when availability of cash is everything. The cash in the sock draw means more than savings. In fact, it's not seen as savings. It seen as an emergency fund of the best kind, available at a moments notice and extremely liquid. Inflation is very far down the list, if it's even on the list.
Cash is King? Give me a break! Let's look at this without emotion, purely on the facts.
The Pound Sterling was born as exactly that. One royal pound worth of sterling silver. That is now worth about $250. Now, let us look at what the paper British pound sterling is now worth...$1.64!
Is cash King? I think not.
Every Thursday afternoon I go to the bank and get a stack of 20's. By the time Sunday morning comes, all I have is a stack of 1's. I do not recommend hoarding US currency. It changes in the dark.
Well, stop visiting the strip club.
They let old farts like you into the clubs? I guess cash really is king ;)
Tell me again why we have private central banks that create money out of thin air and then lend that money at interest to the Citzens of the USA
Give me the good old days when the treasury printed money and just issued it to pay for their debt, war and sevices.
Sure there would be a great debate about who gets the money first -- but now we know who first gets the money created by the fed --- GS, JPM, AGI and that mysterious 2 trillion dollar beneficiary Mister X
http://www.xat.org/xat/usury.html
ANDREW JACKSON (1828 - 1836)
When the American congress voted to renew the charter of The Second Bank of The United States, Jackson responded by using his veto to prevent the renewal bill from passing. His response gives us an interesting insight. "It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners... is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?... Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence... would be more formidable and dangerous than a military power of the enemy. If government would confine itself to equal protection, and, as Heaven does its rains, shower its favour alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles."
Andrew Jackson 1 In 1832 Jackson ordered the withdrawal of government deposits from the Second bank and instead had them put into safe banks. The Second Banks head, Nicholas Biddle was quite candid about the power and intention of the bank when he openly threatened to cause a depression if the bank was not re-chartered, we quote. "Nothing but widespread suffering will produce any effect on Congress... Our only safety is in pursuing a steady course of firm restriction - and I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the bank."
Nicholas Biddle 1836 By calling in existing loans and refusing to issue new loans he did cause a massive depression, but in 1836 when the charter ran out, the Second Bank ceased to function. It was then he made these two famous statements: "The Bank is trying to kill me - but I will kill it!" and later "If the American people only understood the rank injustice of our money and banking system - there would be a revolution before morning..."
Andrew Jackson When asked what he felt was the greatest achievement of his career Andrew Jackson replied without hesitation "I killed the bank!" However we will see this was not the end of private financial influence passing itself off as official when we look at...
1. Andrew Jackson, Veto of the Bank Bill, to the Senate, (1832)
ABRAHAM LINCOLN AND THE CIVIL WAR (1861 - 1865)
With the Central Bank killed off, fractional reserve banking moved like a virus through numerous state chartered banks instead causing the instability this form of economics thrives on. When people lose their homes someone else wins them for a fraction of their worth. Depression is good news to the lender; but war causes even more debt and dependency than anything else, so if the money changers couldn't have their Central Bank with a license to print money, a war it would have to be.
We can see from this quote of the then chancellor of Germany that slavery was not the only cause for the American Civil War. "The division of the United States into federations of equal force was decided long before the Civil War by the high financial powers of Europe. These bankers were afraid that the US, if they remained as one block, and as one nation, would attain economic and financial independence, which would upset their financial domination over the world."
Otto von Bismark chancellor of Germany 1876 On the 12th of April 1861 this economic war began. Predictably Lincoln, needing money to finance his war effort, went with his secretary of the treasury to New York to apply for the necessary loans.
The money changers wishing the Union to fail offered loans at 24% to 36%. Lincoln declined the offer. An old friend of Lincoln's, Colonel Dick Taylor of Chicago was put in charge of solving the problem of how to finance the war. His solution is recorded as this. "Just get Congress to pass a bill authorising the printing of full legal tender treasury notes... and pay your soldiers with them and go ahead and win your war with them also."
Colonel Dick Taylor When Lincoln asked if the people of America would accept the notes Taylor said. "The people or anyone else will not have any choice in the matter, if you make them full legal tender. They will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution."
Colonel Dick Taylor 1
Lincoln agreed to try this solution and printed 450 million dollars worth of the new bills using green ink on the back to distinguish them from other notes. "The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity.
By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government.
Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."
Abraham Lincoln 2 From this we see that the solution worked so well Lincoln was seriously considering adopting this emergency measure as a permanent policy. This would have been great for everyone except the money changers who quickly realised how dangerous this policy would be for them. They wasted no time in expressing their view in the London Times. Oddly enough, while the article seems to have been designed to discourage this creative financial policy, in its put down we're clearly able to see the policies goodness.
"If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe."
Hazard Circular - London Times 1865 From this extract its plan to see that it is the advantage provided by the adopting of this policy which poses a threat to those not using it.
1863, nearly there, Lincoln needed just a bit more money to win the war, and seeing him in this vulnerable state, and knowing that the president could not get the congressional authority to issue more greenbacks, the money changers proposed the passing of the National Bank Act. The act went through.
From this point on the entire US money supply would be created out of debt by bankers buying US government bonds and issuing them from reserves for bank notes. The greenbacks continued to be in circulation until 1994, their numbers were not increased but in fact decreased. "In numerous years following the war, the Federal Government ran a heavy surplus.
It could not (however) pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."
http://video.google.com/videoplay?docid=-515319560256183936#
I have an expat former reporter friend who lives in Japan, two years now. Says its a cash society, and she has never seen anybody use a credit card. Not once.