“While the economic shutdowns and increased use of online retailing are currently diminishing cash’s traditional function as a medium of exchange, it seems that this is being more than offset by panic driven hoarding of banknotes.”
Cross-posted from Swiss Info.
People appear to be bunkering cash amid the coronavirus outbreak, according to a study that seeks to debunk the notion that the pandemic was hastening the demise of paper money due to e-commerce or fears of infection.
Anecdotal evidence across advanced economies suggests a decisive move away from cash, with lockdowns boosting online sales and more stores only accepting card payments. But data cited by former Bank of England policy maker Charles Goodhart and co-author Jonathan Ashworth show a marked increase of bills in circulation in the U.S., Canada, Italy, Spain, Germany, France, Australia, Brazil and Russia.
While some analysts argue that going completely cashless would help the global economy become more efficient, an abrupt end would hurt people with no access to the banking system. It would also pose a challenge to small businesses that find the costs of going digital too expensive.
“While the economic shutdowns and increased use of online retailing are currently diminishing cash’s traditional function as a medium of exchange, it seems that this is being more than offset by panic driven hoarding of banknotes,” Goodhart and Ashworth wrote in a paper for the Centre for Economic Policy Research.
“Cash in circulation has actually been growing strongly,” they wrote.
The findings jar with the view expressed by U.S. President Donald Trump’s former economic adviser Gary Cohn, who argued recently that the virus was speeding up the disappearance of cash…