The latest on ‘Money’ | tutor2u Economics

I’m gearing up to teach some lessons on that curious subject: money. Here are a few links that I’m building up, and reflections on the current state of cash.

The ‘end of money’ (or at least cash money) is one of those predictions that’s been around for a while. It doesn’t seem to happen, despite most governments' hopes. Cash money is closely associated with the illegal, shadow, economy. This fact is reflected in recent Guardian press coverage, which quotes a Bank of England report saying that at least half of all UK banknotes in circulation are being used for purposes such as drug dealing, prostitution and dodgy business deals. A huge number are held abroad.

The report contains an extraordinary admission, with the Bank saying: “The evidence available indicates that no more than half of Bank of England notes in circulation are likely to be held for use within the domestic economy for legitimate purposes.The remainder is likely to be held overseas or for use in the shadow economy. However, given the untraceable nature of cash, it is not possible to determine precisely how much is held in each market.”

The shadow economy is estimated to be around 10% of the UK’s GDP, although it is reckoned to be half the level of Greece and Italy. The new Bank report follows earlier studies that have suggested that 11% of UK banknotes in general circulation are contaminated with cocaine. Criminals and tax evaders will often hoard cash, said the Bank.

Figures for how much cash is in circulation per head will also come as a surprise to people used to taking out just £20 or £30 out of a cash machine at a time. The Bank of England said: “There is now the equivalent of around £1,000 in banknotes in circulation for each person in the United Kingdom”. That’s still a relatively small proportion of GDP, and far lower than the equivalent figures for the US and Australia, at £2,500 and £1,220 respectively.

There’s more detailed coverage of the cash in circulation, and share of cash used in transactions in Telegraph coverage here. I’m putting all my money links into a Storify page.

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