Why People Are Hoarding Cash in the Coronavirus Panic

Why People Are Hoarding Cash in the Coronavirus Panic By Kevin Cochrane for American Thinker

A funny thing happened on the way to the Fed.  To keep the COVID-19 economy rolling, the Federal Reserve pumped in trillions of dollars — mostly by buying securities to increase the lendable reserves of commercial banks.  The people behind all this didn’t ignore us little folks, either: according to the most recent Fed data, they increased the amount of currency in circulation too.  That’s money that folds folks — over 65 billion more dollars during the last sixty days alone.  Its way more than we need to bribe a few government officials, but where did the rest of it go?  It’s not being spent.

Credit and debit card use at retail stores — mostly grocers these days — is way up.  The popular story being bandied about is that cash carries the virus, so people are avoiding its use.  Okay, let’s buy into that line for a minute and assume that folks would rather have rolls of paper named “Charmin” than tidy stacks with pictures of dead presidents and founders.  However, if that’s really the case, then why are ATM withdrawals up so much that many banks are having to order extra currency just to keep them stocked?

Perhaps there’s another force at play here.  Look, we know the facts.  There’s a lot more currency floating around out there than just a few months ago, and most of it isn’t being kept in bank vaults.  Those extra greenbacks aren’t being spent at Walmart for Pop-Tarts and beer, either.  So that brings us to the reasoned conclusion that people are hoarding cash while using cards and cellphones for their transactions.

Folks, it’s history lesson time.

When Queen Elizabeth I ascended to the throne in 1558, the “Banker to the Crown,” Thomas Gresham, penned a letter to her outlining his plans to finance past and future war debts — and there were many.  He also outlined a plan to restore the value of England’s monetary base that was ruined in the Great Debasement fifteen years earlier by the queen’s father, Henry VIII.  Borrowing an observation from Copernicus, simply stated, he said, “Bad money drives good money out” — and Gresham’s Law was born.

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