UK savers go for 'cash under the mattress'

silverharp

The UK chief cashier believes that people are hoarding currency. I would have put it down to an increasing black economy in a recession or people forced to stop using credit cards. What do you think?




http://www.ft.com/cms/s/0/4f211e14-e263-11de-b028-00144feab49a.html

UK savers go for ‘cash under the mattress’
By Daniel Pimlott, Economics Reporter

Published: December 6 2009 23:54 | Last updated: December 6 2009 23:54

British savers have hoarded cash over the past two years in response to fears of financial armageddon and historically low interest rates, according to research by the Bank of England.

The “cash under the mattress” trend has accelerated even as people use credit and debit cards for more daily purchases.

The value of notes in circulation declined from 6 per cent of annual national income in 1970 to a low of 2.4 per cent in the mid-1990s.

But the amount of notes has increased in the past two years to 3.2 per cent of GDP as the credit crisis raised the threat that money in banks might no longer be safe.

The findings were laid out in a speech by Andrew Bailey, the Bank’s chief cashier and the man whose signature appears on British banknotes. “Demand for banknotes has risen during this recession, and particularly for high denomination notes, reflecting loss of confidence in banks, and very low interest rates,” he told a US conference .

Low inflation since the mid-1990s has increased people’s confidence in the value of cash, and reduced the costs of holding cash rather than depositing money in interest-bearing deposit accounts. The preference for cash contrasts with previous recessions, when inflation and interest rates were much higher.

In the two years to February 2009, the Bank had to issue almost £40bn in new notes, compared with about £20bn ($33bn) in the two years before that.

Demand has picked up for £50 notes in particular during the current recession. Since the summer of 2007, the total value of our £50 notes in circulation has risen from £7bn to £9bn.

The rise in cash holding has come even as notes and coins have been used less and less. In value terms, cash made up about 9 per cent of all retail transactions in the early 1990s, compared with around 4 per cent now.

The same pick up in demand for banknotes has been seen in other major currencies, including those of the US and Eurozone.

Mr Bailey said there could also be other factors at work, including the rising number of cash machines holding greater inventories of cash so that they do not run out.

The urge to hoard banknotes echoes the rush by investors into gold during the financial crisis. The US government recently had to halt sales of the world’s most popular bullion coin, the American Eagle, for the second time in the last two years after running out of inventories.

leninbenjamin

good time to take up burglary

Joe1919

Interesting. People can (from my limited experience) sometimes salt away or hoard cash is if they think they are going to go bankrupt or become unemployed and 'means tested' as savings can be accessed.
Could this be true in some of the cases?

Latchy

There is also talk of the banks charging £2.50 a time to use their atm machines.If that happens then it's good enough reason for keeping a stash of cash under the B..er ......in a hidden place