Cash boom in Germany: Why we are hoarding billions!

Cash boom in Germany: Why we are hoarding billions!

The amount of cash in the euro area continues to increase, even as electronic payment methods become more popular. Loud t online People in Germany have increasingly started hoarding cash instead of spending it. The Bundesbank currently estimates that around 42% of banknotes in Germany are held as a “store of value”, which is almost two and a half times as high as in 2013. At the end of 2024, an estimated 395 billion euros will be stored in German private households.

There is significant inequality in the distribution of these cash reserves; Many households have either no cash reserves or only very small ones. A total of 1.564 trillion euros in cash were in circulation throughout the euro area in March 2023. Since spring 2022, the amount of cash has increased by almost 30 billion euros and by 300 billion euros since the beginning of the corona pandemic, which indicates a remarkable trend.

Banknote paradox and crisis awareness

Interestingly, the growth rate of the cash supply has slowed since 2022, but remains positive overall. This phenomenon, known as the “banknote paradox,” has been observed globally. Loud Bundesbank The increase in cash in circulation is a frequently documented event in times of crisis. The sharp increase in the proportion of cash held as a store of value is also facilitated by the uncertainties resulting from various crises.

In 2023, 50% of payment transactions in Germany were still processed in cash, but this only accounted for 25% of total sales. The trend shows that the debit card has replaced cash as the most widely used means of payment; Only 23% of respondents said they preferred to pay in cash.

Influence of retail and the shadow economy

Retailers are increasingly preferring to accept electronic payments, especially contactless ones. According to Ralf Wintergerst from Giesecke+Devrient, uncertainty is the driving factor behind this cash hoarding. Particularly during the Corona pandemic, the proportion of cash stored as a store of value reached a high of 43%.

In addition to hoarding, the reasons for the increase in the amount of cash include the shadow economy, which involves economic activities outside the law, and the role of cash as a reserve currency abroad. The Bundesbank is committed to maintaining cash and the necessary infrastructure, as cash offers key advantages such as independence from electrical systems and the underlying infrastructure.

The developments show that despite increasing digitalization, cash plays an important role in the financial landscape, especially in times of crisis when it is valued as a safe store of value.