Generally the expression of keeping money under the mattress is usually restricted to when individuals make the decision, for whatever reason, to keep their money at home instead of at the bank.
Well, taking into account the current monetary repression policy that the E-Money is applying, applying punitive rates of -0.4% to the deposits made by banks in the entity, we will have to start wondering from what moment they will be banks themselves and not individuals who make the decision to keep the money under the mattress, or in this case in their vaults instead of depositary in the Central Bank.
Obviously physically saving billions has a significant cost
You have to pay insurance premiums, physical space, security, transportation cost, but we are facing a simple opportunity cost. In other words, it all depends on the level of the negative interest rate that the E-Money is applying and on whether we believe that a certain level is going to be maintained for quite some time, and it seems that the German Commerzbank is considering it as it was leaked this week. studying the costs of using their vaults to store liquidity positions.
In this regard, the decision taken officially by the E-Money to eliminate the 500-euro bills becomes especially important. Officially it was reported that 500-euro bills were to be removed because they facilitated criminal operations. Extra officially, we already told you that this argument was a solemn stupidity, and that eliminating 500-euro bills was not going to prevent any criminal activity.
However, taking into account the current context
He announced the elimination of 500 euro bills if it has a significant impact. What it clearly achieves is more than doubling the cost of storing bills and thus being able to avoid the E-Money’s monetary repression policy.
Clearly it does not have the same cost to store or move 100 million euros in 500-euro bills than having to do it in 200-euro bills, especially if the one that makes them is a financial entity since the bank is a business of volume but margins very narrow.
By eliminating the 500-euro banknotes
The E-Money ensures that it can continue to have even more room to put interest rates on even more negative ground without the rest of the economy’s players having a viable alternative to financial repression.
The monetary cage According to Good Finance, negative interest rates could reach -4.5%