Archive for April 13th, 2018

High-denomination Banknotes in Circulation: A Cross-country Analysis

April 13, 2018

Interesting research by Gordon Flannigan and Stephanie Parsons of Reserve Bank of Australia in the central bank’s revamped Bulletin.

They try to see the reasons behind demand for High Denomination notes in Aus, Canada and UK:

In Australia, Canada and the United Kingdom, the number of high-denomination banknotes in circulation has increased at an above-trend rate in recent years. Evidence suggests that overseas demand might be a common driver of this elevated growth. Increased domestic demand for both transaction and store-of-value purposes may also have contributed, as well as responses to changes in government and central bank policies. This research was undertaken with assistance from members of the Four Nations Distribution Working Group, in line with the group’s objective to explore banknote-related topics that are directly relevant to the member central banks.

The overseas demand is mainly from Asian countries:

A key source of overseas demand for AUD 100 and CAD 100 banknotes appears to be Asia. Liaison with the cash industries in Australia and Canada suggests that there has been an increase in the proportion of AUD 100 and CAD 100 banknotes shipped to Hong Kong and Singapore. For example, in the five years to 2016 it is estimated that 80 per cent of foreign shipments of CAD 100 banknotes were destined for Hong Kong, compared with 60 per cent in the previous five years. Further, it is estimated that shipments of CAD 100 banknotes to Hong Kong accounted for about 5 per cent of all CAD 100 banknotes on issue in 2016, significantly increasing growth in banknotes in circulation in that year. Similarly, partial data from the Australian cash industry suggest that shipments to Hong Kong and Singapore in 2016 were equivalent to about 6 per cent of all AUD 100 banknotes in circulation. The link between Asian demand and GBP 50 banknotes in circulation is less clear. GBP 50 banknotes are primarily demanded by foreign exchange wholesalers abroad, consistent with an overseas store-of-value motive (Fish and Whymark 2015). However, because the British pound is a more prominent reserve currency, offshore demand is likely to be more widespread across countries.

Hmm..

Lots of other ideas and regressions in the study.

It was also interesting to note how government policies in Australia are creating speculation around High denomination notes:

Since peaking in late 2016, growth in demand for AUD 100 banknotes has declined considerably (Graph 4). This may partly reflect heightened uncertainty among consumers and businesses about the future status of AUD 100 banknotes following the Australian Government’s announcement in December 2016 of the formation of the Black Economy Taskforce (BETF). This taskforce aims to investigate and identify where regulations and policies could be introduced to reduce activity occurring outside the tax and regulatory system (excluding illegal or criminal activities). The BETF convening announcement included, among many other options, a discussion around strong demand for AUD 100 banknotes and identified the use of cash as an area to be investigated, generating intense media interest. This announcement coincided with heightened public interest in the future of high-denomination banknotes following decisions in some jurisdictions to withdraw the legal tender status of some high-denomination banknotes (India and Venezuela) or to discontinue production and issuance (euro area).

Daily lodgements of AUD 100 banknotes into cash depots increased sharply after the BETF announcement (Graph 7). It may have been that the BETF announcement, and associated media speculation about the future of AUD 100 banknotes, contributed to uncertainty among the general public and prompted some to spend AUD 100 banknotes that were previously held as a store of value. Liaison with the cash industry has indicated that the increase in lodgements has been evident across a broad range of retail customers, has occurred in most states and has been concentrated in capital cities.

 

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Banking on a ‘shithole’: US-led racial capitalism in Haiti began long before Trump

April 13, 2018

Prof. Peter James Hudson in  this post writes on how City Bank (Citibank now) profited from racial ideology and economic policy to secure control of Haiti’s finances and banking.

In nut shell, so badly named shithole countries have been very lucrative for Wall Street players for a long time.

(more…)

Pinjore Gardens: A Plot to Outwit the Mughals.

April 13, 2018

Nice bit of history of Pinjore  Gardens in Panchkula (near Chandigarh) at Live History India portal.

The beautiful gardens were built by the Mughal Governor of Punjab. The local Maharaja feared that Mughals would move to Panchkula and occupy more lands. The Maharaja then devised a plan to keep Mughals away.

Read the article for more details..


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