Posted on 06/27/2007 1:56:45 AM PDT by bruinbirdman
Euro notes have become the world’s favourite form of cash because of Europeans’ financial habits rather than international demand for the young currency, according to a European Central Bank report released on Monday.
Banknote holdings per person are almost twice as high in the 13-country eurozone as in the US, the study shows, while eurozone citizens typically withdraw 50 per cent more each time they use a cash machine.
Since the introduction of euro notes and coins in 2002, circulation has soared above expectations. Last year, the value exceeded the value of dollar bills in circulation.
However, the ECB’s study suggests that global demand for the euro is less important than previously thought and that, beyond Europe, the dollar remains the cash of choice.
Net shipments of euro notes to outside the eurozone are declining, says the report. Only 10-15 per cent of euros in circulation are held abroad. About 60 per cent of US dollars in circulation are held overseas.
One explanation for Europe’s cash addiction could be that the use of payment cards is less developed in many eurozone states than in the US. The ECB believes low inflation and interest rates have increased the attraction of holding cash, while euros are available in higher-denomination notes than dollars. Demand for €500 notes has shown a particular increase. Since 2002, a “re-optimisation” of currency holdings has “led to a considerable increase in the importance of banknotes as a store of value and as a means of payment for large-value transactions”, says the ECB.
Excluding notes held abroad, per capita holdings in the US were worth the equivalent of about €870. For the eurozone, the figure was more than €1,600.
Separately, the report suggests that the extent to which countries have switched foreign exchange reserves into euros has been exaggerated by anecdotal evidence. At constant exchange rates, the euro share in reserves “has remained broadly stable” since 2005, it says.
The dollar remains the most important reserved currency with its share also hardly changing. “This contrasts with several press reports, partly based on official announcements by some central banks, indicating a tendency to shift away from US dollar holdings in global foreign exchange reserves.”
Between mid-2005 and the end of 2006, the euro share in the stock of international debt securities and in international loan and deposit markets declined. The euro became less important, too, in the settlement and invoicing of imports into the eurozone – probably reflecting the higher cost of oil, which is priced in dollars.
If you don’t trust banks and/or you are actively trying to avoid taxes and/or electronic payment isn’t convenient and/or secure, you use cash for transactions.
Then again, some people just like cash...
>>>euros are available in higher-denomination notes than dollars. Demand for €500 notes has shown a particular increase
Convenient for the drug cartels.
About 60 per cent of US dollars in circulation are held overseas.
Foreigners hate us, but love our financial strength?
Not surprising. The US doesn't renege on debt or revalue its currency. Unlike many other countries ...
What would you do if someone stole your identity, cleaned out your checking account and your credit cards had a hold placed on them? Or if the electical power system went down due to a large series of thunderstorms?
I think the absolute minimum to keep on hand in small bills is one months expenses.
In general it would be wise to have some cash for an emergency. Most of my reoccurring bills are paid automatically electronically through home banking. Food would be the primary concern if a disaster hit. We have a fair amount on hand at the house normally.
no - you pay with dredit card - they don’t.
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