Cash has gone M.I.A. Central Banks around the world are printing money but they aren’t all that sure what happens to it after it leaves the printer. I read a recent article in the Wall Street Journal: The World’s Cash Is Disappearing. Bankers Aren’t Sure Where It Went. It’s written by David Winning and James Glynn and highlights a global problem: nobody is quite sure where all the cash is going.
As a payments geek who often talks about the electronic replacement of paper money, this intrigues me. As the article mentions, some of the money leaves the country to support other economies, and of course—we’ve all seen the movies—some of it gets tied up in illicit activities. Even still, that cannot account for all of it. As the article notes:
Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. Central banks don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery.
The puzzle is especially perplexing since societies and companies are going cashless, given the boom in payments by cards and cellphone apps.
People are hoarding cash. Whether it’s the distrust in the local or federal government, the global economy, or a loathing of the banking system, nobody really knows. That said, thinking about all the reasons and ways for people hoarding cash is sort of fun.
While this all makes good happy hour talk, there is a real cause for concern. Governments need to print more money to make up for money going out of circulation. They are throwing more money into a seemingly leaky bucket, but what happens when the leak stops and someone puts all the metaphorical water back in the bucket? Inflation. Too much currency in the system will drive up prices.
I guess this is further proof that there is a lot to do in the “war on cash.” Or another way to look at it is not as many people are as on board with the cashless society as we think. Nevertheless, it gives us payments people something to think about over the weekend.
Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group
