Merry Christmas and Happy New
Year to all my readers. And to everyone who left a comment this year, thank
you. It's always fun to debate things over in the comments section and I feel
it makes the blogs themselves stronger. Don't forget to check out the discussion board where we had a
number of interesting discussions in 2018.
The last
time I published my Christmas cash usage chart was in 2015. I figured it
was high time to update it:
The annual Christmas spike in U.S. banknote demand is getting harder and
harder to pick out in the chart. So are the monthly upticks coinciding with
payrolls. Most people are getting pretty comfortable buying stuff with cards.
And so they are less likely to take cash out of an ATM before the holiday
chaos or withdraw grocery money after a paycheck has been deposited.
Even though transactional demand for dollars is on the downswing, the stock
of Federal Reserve banknotes continues to grow at a healthy pace. The slope
of the black line (i.e. its growth rate) may not be as steep as it was in the
1970s, 80s, or 90s, but it is certainly steeper than it was in the 2000s. It
is typical to divide cash demand into two buckets. Cash held for transactional
purposes gets folded into a wallet. Cash held for store-of-value
purposes gets buried in back yards or hidden under mattresses. Continued
growth in the demand for U.S. dollars is mostly due to the latter, not only
in the U.S. but all over the world.
Here is the same chart for Canada:
Both the Christmas bump and the sawtooth pattern arising from monthly
payrolls are less noticeable than previous years. But these patterns remain
more apparent for Canadian dollars than U.S. dollars. Not because Canadians
like cash more than Americans. We don't, and are probably further along the
path towards digital payments then they are. Rather, the percentage of U.S.
dollars held overseas is much larger than Canadian dollars, so domestic usage
of U.S. cash for transactions purposes gets blurred by all its other uses.
Like the demand for U.S. dollars, the demand for Canadian dollars is growing
at a healthy rate. So far the slope of the black line (2016-2018) is a bit
steeper (i.e. its growth rate is higherr) than all other periods except for
the earliest one, 1987-1987. Paper Canadian dollars aren't going away anytime
soon.
These were my top posts of 2018 by order of popularity:
Two
notions of fungibility
Did
Brexit break the banknote?
The
€300 million cash withdrawal
"The Narrow Bank"
Bitcoin
and the bubble theory of money
Two older posts got a lot of visitors too.
Ghost
Money: Chile's Unidad de Fomento (2013)
Fedcoin
(2014)
Who knew that Chile's strange indexed unit of account, the Unidad de Fomento,
would be a draw?
My favorite post of the year was Paying
interest on cash. I like this policy. It helps the lower-income and
unbanked earn interest. It also provides a means for central bankers to
promote cash usage, which in turn helps keep financial privacy alive. And
economists should like it, since it fulfills the Friedman rule.
For those of you who don't know, I've also been doing much more paid writing
in 2018. Prior to that, blogging was more of a hobby. Here are the venues
I've been writing for: Breaker,
Bullionstar, and
the Sound Money project.
If you don't have much time to check out my articles, here are my favorites from
each:
Bitcoin
Is Perfect for Cross Border Payments (Except for One Big Problem) - Why I
don't use bitcoin for getting paid.
The
future of cash: Iceland vs Sweden - We always assume that Scandinavians
are moving away from cash, but Iceland shows that this isn't the case.
Pricing
the anonymity of banknotes - Should financial anonymity be provided in
abundance, banned, or should we pay for it?
Lastly, R3 just published my paper on a central bank digital currency for
Brazil.
— JP Koning (@jp_koning) December
9, 2018
Many of the points I make apply just as well to any other
country.
