Nigel's Eyes

20240617 Cashing out - a look at the other kind of money supply.

In 2020, out of 303m GBP5 notes in circulation, 15 million were replaced due to damage. In the following year, the total in circulation was 296m and of those 44m were replaced.

That figure is very out of kilter compared to previous years so what was different?

Others may disagree but for me it's this: lower denomination notes circulate faster than those of higher value. But what if retailers were not giving out as many notes in change? Notes would go to banks which perform quality control and submit damaged notes (which ATMs have trouble with). The significant drop in the number of notes in circulation suggests that banks were credited with the value of notes that were not replaced.

The only significant factor at that time was the CoVid-19 pandemic and the resulting push to ban cash in many retail environments.


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