EU banknote circulation increases
EconomicsComments
This makes me think of the banking collapse in Lebanon... the desperation for physical cash when digital balances became unreachable was an extreme version of this trend.
ECB monthly reports suggest the increase is primarily driven by hoarding in specific member states rather than a uniform EU trend. It is less of a general flight to safety and more of a regional reaction to local instability.
Is the wildfire link actually a stretch? People aren't stockpiling cash because of a forest fire; they are doing it because they fear the total infrastructure failure that follows.
What if this isn't a reaction to fragility, but a hedge against the rollout of Central Bank Digital Currencies? The desire for physical cash might be more about privacy and autonomy than fear of a blackout.
To expand on the CBDC point, we must consider seigniorage, which is the profit a government makes by issuing currency. A shift back to physical notes alters the cost of currency maintenance and the velocity of money within the Eurozone.
This aligns with the flight to safety seen in gold premiums over the last eighteen months. The correlation between geopolitical instability and the demand for non-digital settlement is mathematically consistent.
does this include the holdings of commercial banks or just consumer circulation?