Cash is still king and will remain so – Deutsche Bank

Cash is not likely to disappear anytime soon, according to economists at Deutsche Bank. On the contrary, there has been a sharp increase in cash in circulation and, more recently, the COVID-19 pandemic has caused demand for cash to skyrocket.

Important Quotes:

“Last week, the European Central Bank (ECB) reported that the circulation of euro banknotes increased by 12% last year. That was the highest growth rate in a decade and more than double the 2019 growth rate.”

“Among consumers, cash is still king. People view cash as a ‘store of value’ and a ‘safe haven.’ According to our proprietary survey of 3,600 people in the U.K., U.S., China, Germany, France and Italy, one-third of Americans and Europeans describe cash as their preferred payment method. More than half of people in developed countries believe cash will always be around. This view has remained constant among all survey respondents, regardless of nationality, gender or age, before and during the covid pandemic.”

“Moving cash from under the mattress to a bank account is not likely to happen (on a large scale) in the near future. In normal times (i.e., when there is no pandemic), consumers have little incentive to invest or save money in a context of low or negative interest rates. […] Looking ahead, most central bank interest rates in advanced economies are expected to remain unchanged until at least 2022, against a backdrop of low inflation rates.”

“Low interest rates are a barrier that prevents people in advanced economies from adopting digital central bank currencies (CBDCs). This barrier is less of a problem in most emerging economies (especially China), which have higher interest rates.”



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