Post-Brexit Cash Hoarding Is "Worrying Signal" For UK Economy

Tyler Durden's picture

Critics warn that "the Monetary Policy Committee made a serious policy error in August when it cut rates and restarted QE," according to Pantheon's Samuel Tombs, as the massive spike in UK narrow money-supply - which we first noted here - reflects "uncertainty, not income growth." Pantheon warns that they doubt the biggest surge in cash-hoarding since Lehman "signals that an economic renaissance is on the way. On the contrary, the pick-up in the desire of households and firms to hold money, as opposed to other assets, is a worrying signal."

On the heels of Japan, Switzerland, and Germany, the UK's biggest surge in cash-hoarding since Lehman has been suggested by some as sign - along with better than expected economic data - that the British economy is faring well. However, as we noted previously, this is almost certainly wrong and Pantheon agrees...

"As our chart below shows, narrow money accelerated as the economy entered recession in 2008. Growth in narrow money also picked up at the turn of the millennium, when fears abounded that electronic payment systems would stop working because of the “Y2K” bug. In short, uncertainty, not income growth, drives money demand.

 

"It is unlikely to be a coincidence that strong money growth has occurred alongside a collapse in business and consumer confidence and pessimism about the U.K.’s economic outlook since the Brexit vote in June. Note that the pick-up in narrow money growth has tracked the plunge in sterling, which has been a barometer of investors’ confidence in the U.K.’s economic outlook."

By contrast, people actually tend to have less desire to hold money in times of confidence... And in fact, sudden accelerations in the money-supply usually mislead...

 

Pantheon ends on a Carney-hope-crushing note...

"Accordingly, we doubt that strong growth in the money supply signals that an economic renaissance is on the way. On the contrary, the pick-up in the desire of households and firms to hold money, as opposed to other assets, is a worrying signal."

Of course, as we have heard many mainstream economist complain recently, “Cash hoarding is a problem for monetary policy,” which can only mean more repression and a more aggressive war on cash.  Simon Ward, economist at Henderson Global Investors, said:

"People may be hoarding notes not for safety reasons but because the Bank of England is expected to cut interest rates significantly, possibly even imposing a negative rate on bank reserves, forcing banks to start charging for operating current accounts."

 

"Hoarding may also reflect increased demand for £50 notes due to uncertainty about their future supply,"

 

"(BOE) Governor Carney confirmed in June that there are no plans to introduce a plastic version of the £50 note, fuelling fears raised by Mr (BOE chief economist) Haldane's earlier speech that the Bank intends to restrict the future supply of cash in order to create scope for interest rates to fall further below zero."

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LawsofPhysics's picture

Another reason the elite want to ban cash...

same as it ever was...

Kirk2NCC1701's picture

"Invest in Cash, Flash and Gash, if you want to live long and prosper", I heard once.

Kayman's picture

Gash is a liability.

But a stash gets gash- short term rent or long term lease.

MalteseFalcon's picture

“Cash hoarding is a problem for monetary policy...”

No, monetary policy is the problem.

Cash "hoarding" is a sign that the policy has failed and the policy's limit has been reached.

It is obvious that if cash were outlawed, it wouldn't be too long before everyone is looted and "monetary policy" breaks down again.


Déjà view's picture

Brexit...either way...come what May...stick a fork in it.

Kayman's picture

For our dirty money elites, everything serves as pretext. Central Banking is enslavement.

King Tut's picture

BYOB(Be Your Own Bank)

adonisdemilo's picture

Your opinion----BOLLOCKS.

Life goes on, just intent in removing the EU shackles as soon as practicable.

The majority of the population neither know nor care about the  bullshit propaganda espoused by "intellectuals", especially those on 6 figure plus incomes who talk their own book.

Bill of Rights's picture

Speaking of inflation...

 

https://3.bp.blogspot.com/-aEuhrCLDdpI/V96aPEpdu4I/AAAAAAAAlk4/n4JotY73i...

 

There is a significant blast of price inflation brewing, almost no one expects it

No inflation if you sleep in the street.....

https://2.bp.blogspot.com/-nlhzHE1p4OE/V-AON0thh5I/AAAAAAAAlnM/SCSfw937r...

TheABaum's picture

This sounds like a flimsy excuse for NIRP. 

Elco the Constitutionalist's picture

How are the Jews going to keep strip mining the middle class if they keep all their money locked up in banks?

King Tut's picture

Thanks to Obummer's War on Coal they can pick up mining equipment on the cheap

FrankieGoesToHollywood's picture

One guy's hording is another guy's savings.

CRM114's picture

Yeah!

When did that name change happen?

 

Might one point out that financial advisors are obliged, by Government dictat, to advise increasing ready-access savings in economic conditions like these, especially when job hours and contracts are so uncertain. Furthermore, with reduced interest rates, people are obliged to put aside a higher proportion of their earnings for their pensions.

 

Dear Governments, People are saving more because you've told them to....

..AND because you've created the conditions that force them to.

 

f#ckwits.

Dabooda's picture

The more interesting question:  WHY did that change?  "Hoarding" implies selfishly holding on to something at the expense of someone else.  Who might that "someone else" be, here?  Maybe bankers, issuers of credit cards, stockbrokers, lots of people, all united by the belief that what's yours really ought to be theirs.

Kirk2NCC1701's picture

When Apple, Cisco, or Microsoft does it, it's called "cash rich". Especially if they keep it overseas. It's perfectly harmless, prudent and acceptable.

When YOU do it, it's called "Hoarding". It's suspect, harmful, imprudent and unacceptable.

To get around that, there are a number of things you can do:

- Incorporate! As an LLC, S-corp or C-corp. In whatever state that makes the most sense for your situation.

- Incorporate a holding company overseas (e.g. Ireland), that owns a significant share of your US company.

- / Depending on the amount of Cashish involved, you may donate to the Clinton G.I. /sarc

JohninMK's picture

Being "cash rich" does not normally mean having a lot of cash in banknotes.

I somehow doubt that the three companies you mention have any large bundles of actual notes in their tax haven offices, usually with very few staff on site. Its all just digits on a computer.

 

 

WTFUD's picture

Get out there, borrow, spend , you traitorous fuckers.

Theresa May

Kirk2NCC1701's picture

Translation: Banksters need VOM (Velocity of Money).

Central Banks create and send money to banks and brokerages, where it's used to prop up stocks and bonds. These businesses are doing their part to perpetuate the fiat economy.

You must do your part: Spend and consume. Spend to keep up the VOM, and consume to move products and use services in the real economy.

JohninMK's picture

Spend, spend to keep up the tax revenue as well.

Sales taxes, employee taxes, company taxes etc etc

FIAT CON's picture

So the system is going to crash because the elite have frightened the populous into saving Currency!

Hmmm seems to be a fed up fragile system.

If we were to steal all the wealthy peoples money and spend it then this wouldn't be a problem.

roadhazard's picture

I thought people didn't have any money to hoard.

dealmakerman's picture

Here is a paper on how savers and investors can actually profit from the War on Cash and Negative Interest Rates based on a variation of Gresham's Law. https://bunky1787.wordpress.com/2016/09/04/can-you-profit-by-saving-an-extreme-money-overture/

BigCumulusClouds's picture

Fools.  They should not hoard more than 5% of their assets in cash.  Hoard gold and silver and copper and nickel and platinum.

Batman11's picture

OK, investors here’s the truth.

Much is made of the Central Banker’s toolbox but in reality we control the economy through two dials:

1) Interest rates

2) QE

All we can do is twiddle these dials to control the economy.

When the interest rate dial reaches zero, there is only one way to go, negative.

To be quite honest with you investors, having two dials to control and economy is not really sufficient.

Also, monetary policy is such a broad brush it has unintended consequences.

After the dot.com crash Alan Greenspan loosened monetary policy to get the economy going again. The broad brush effect stoked a housing boom.

When he tightened interest rates, to cool down the economy, the broad brush effect burst the housing bubble. The teaser rate mortgages unfortunately introduced enough of a delay so that cause and effect were too far apart to see the consequences of interest rate rises as they were occurring. The end result 2008.

With the Euro-zone, the Germans were the first ones to go bubble crazy over the dot.com boom and their version of the NASDAQ collapsed by 97% in the bust.

To help Germany, the ECB lowered interest rates and blew bubbles in the Club-Med nations that burst when the Euro-zone crisis hit.

To be perfectly honest investors, being a Central Banker is an impossible task as monetary policy is a pretty lousy tool for controlling an economy.

Unfortunately, that’s the way it is. It’s a bad job but someone’s got to do it.

On the positive side, you only have to twiddle the dials once a month so there is a lot of free time.   

besnook's picture

if cash is outlawed then a new black market cash proxy will be used. don't these fuck wads learn anything from the prisons they like to build?

adanata's picture

 

We've all been talking about it; bitcoin, fedcoin, negative interest, the 'war on cash' and that's all it is really... talk. Hot air balloons sent up to see what happens. Like this bizarro 'election' with Hildebeast barely treading water while spending $145million in ads. The banks haven't realized it yet but I do believe they have hit the wall. The Sheeple may have dogs yapping at their heels but they can see the cliff and flames ahead and they won't go there. Most people know they're being jerked around; they know they've been robbed, they can smell the rats all over the place. Common sense is rearing its ugly head. It's like a meme spreading throughout land. When people realize their currency has been destroyed they will NOT just move on to the 'next thing'. Nope. There's been a change in the air. There will be a reckoning.

Sid James's picture

We deliver to 5000 UK homes in the UK. There was a noticeable slowdown in consumer spending in August but that's quite normal as people are away on holidays then.

Things would normally start to recover around early September as people get back from those holidays but there's no sign of it so far.

It could be Brexit, but it could also be people saving cash to spend at Christmas or saving to pay off their holiday credit card bills.

There doesn't seem to be any evidence of any voters backtracking from Brexit though, despite the ongoing threats and Project Fear tactics from European leaders. Most people I speak to just want to get on with it and would prefer a hard Brexit. 

When Brits are threatened by Polish and Slovakian leaders saying that they intend to make Britain pay for its decision to leave the EU, the general reaction is to laugh loudly.

More worrying for everyone in Britain is the likelyhood of massive migration flows as the entire house of EU cards collapses.

JohninMK's picture

On you last point, thank God we have a minimum 20 mile wide moat. All we need now is flat out production of small armed patrol boats. Preferably with orders to shot any incoming boat that won't turn round. Nothing like setting an example to discourage the others.

As to your other points, I think its your third para.

Brexit is stronger than ever around here. Just let them try a second referendum! Then there's all those EU politician idiots spouting shit for domestic consumption. Do they really think that Germany will want a tariff wall against them in their second biggest market? Just hope the UK has recruited some hard nosed bastards from business that have cut their teeth dealing with the Chinese. A few even harder shits from Turkey/Iran/Russia wouldn't go amiss either. About time those bureaucrats in Brussels found out what negotiations with an equal were like.

Fanakapan's picture

Just hope the UK has recruited some hard nosed bastards from business that have cut their teeth dealing with the Chinese.

 

You cant be a Brit, otherwise you'd be aware that every time our politicians, or business folk attempt to deal with the Chinese, they get f_cked over good and proper.

Bemused Observer's picture

Do these idiots really think that by restricting cash, that they will force people to spend?

Wow, what utter stupidity. No morons...what will happen is that they will begin to refuse your official cash, and seek other means to hoard value.

Your 'restricted cash' will become worth zero, and some new 'currency' will be sought, one which you DON'T have control over.

But go for it...I'll make popcorn.

dealmakerman's picture

Here is a paper on how savers and investors can actually profit from the War on Cash and Negative Interest Rates based on a variation of Gresham's Law. https://bunky1787.wordpress.com/2016/09/04/can-you-profit-by-saving-an-extreme-money-overture/