Personal Finance

Who is using all this cash?

  • Last Updated:
  • Apr 21st, 2017 6:40 am
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Deal Addict
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Sep 9, 2012
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Oakville, ON
Kiraly wrote:
Apr 16th, 2017 12:54 pm
I don't think the underground economy explains all of the 74% increase in cash in circulation over the last 12 years. Perhaps it's foreign demand for our dollar being used as a reserve currency.

This says that 3/4 of all US $100 bills are taken out of the US and held in other countries as reserves: http://fortune.com/2016/06/17/100-bill/
And this says that demand for Australian $100 bills is largely coming from China: http://www.theaustralian.com.au/busines ... 043174aa0c

Maybe this is affecting Canadian currency too.
Total population increase in canada during the period in the neighbourhood of 4 or 5 million more people. This would explain some of the increased demand for currency.
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Jan 9, 2011
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foreigncontent wrote:
Apr 16th, 2017 4:43 pm
US is different since you have countries actually using the US dollar has currency. Interesting about the OZ$ but not sure who would hoard Can$, since most countries i've been wanted nothing to do with it
According to Wikipedia, the CAD as an international reserve currency is ranked 5th in the world, behind the USD (64.0%), EUR (19.7%), GBP (4.4%), and JPY (4%). We may be a small player but not insignificant; and our share of that pie grew by 33% (1.5% to 2.0%) since 2012. Foreign reserves may be where the bulk of the increase in bank notes has ended up.
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Nov 13, 2013
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OTTAWA
Kiraly wrote:
Apr 16th, 2017 5:20 pm
According to Wikipedia, the CAD as an international reserve currency is ranked 5th in the world, behind the USD (64.0%), EUR (19.7%), GBP (4.4%), and JPY (4%). We may be a small player but not insignificant; and our share of that pie grew by 33% (1.5% to 2.0%) since 2012. Foreign reserves may be where the bulk of the increase in bank notes has ended up.
They don't usually deal in cash though. Bonds and other fixed income securities form the vast bulk of their holdings.
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fogetmylogin wrote:
Apr 16th, 2017 7:24 pm
They don't usually deal in cash though. Bonds and other fixed income securities form the vast bulk of their holdings.
True as that may be, the US estimates that 75% of all US $100 bills in existence are being used for exactly that purpose in foreign countries. I'm sure it dwarfs bonds and securities, but that is still a lot of cash.
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Nov 24, 2013
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Kingston, ON
CanadianLurker wrote:
Apr 16th, 2017 4:44 pm
Total population increase in canada during the period in the neighbourhood of 4 or 5 million more people. This would explain some of the increased demand for currency.
This is true, and it jogs my mind too that the majority of immigration is coming from places where, culturally, cash is king.

Some immigrants may even be stockpiling Canadian cash while still overseas. China in particular is strict about moving funds out of the country, right? Are they moving it in CAD cash instead? I seem to recall a Border Security episode with someone trying to bring in $90K undeclared packaged in with food items.
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Mar 1, 2016
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Kiraly wrote:
Apr 16th, 2017 5:20 pm
According to Wikipedia, the CAD as an international reserve currency is ranked 5th in the world, behind the USD (64.0%), EUR (19.7%), GBP (4.4%), and JPY (4%). We may be a small player but not insignificant; and our share of that pie grew by 33% (1.5% to 2.0%) since 2012. Foreign reserves may be where the bulk of the increase in bank notes has ended up.
thanks, didn't realise they would be holding physical cash. i assumed they would be holding securities.
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Dec 27, 2009
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Ottawa, ON
apnayloags wrote:
Apr 15th, 2017 1:42 pm
Cash is king, its needed for everything.
do u pay bus fare with CC/debit? lol
Yes, I pay my bus fare with credit card (Presto pass). Top it up online as needed.
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Dec 27, 2009
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Kiraly wrote:
Apr 15th, 2017 3:16 pm
Sure, but there's much more to the story than inflation and GDP growth. from 2004 to 2016, cumulative inflation was 25%, and GDP growth was under 10%. But the dollar value of cash in circulation is up by 74% over the same period. The Bank of Canada only issues cash to meet what financial institutions order to satisfy customer demand. Considering that people are using much less cash than they used to, where is all of this additional demand coming from? Note that the bulk of the increase is in $100 bills.
Drug deals?
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Dec 27, 2009
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FoFai2015 wrote:
Apr 15th, 2017 8:13 pm
I have not seen a vending machine that takes bills. But I have seen some that take cards. (I wish the one at work had that feature.)
Really? Lots of vending machines take bills. They are finicky though, so if a bill isn't in perfect shape it will often get spit out.
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Sep 19, 2013
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Winnipeg
the # of transactions have increased too. so it would be interesting to compare the % of cash transactions then and now. that would be a much more apples to apples sort of a comparison.

other than that, new immigrants dont qualify for credit cards right away, and those specially doing min-wage jobs deal mostly in cash. i bought my 1st car 4 years back in an all-cash transaction, it was $6K so quite a significant amount.

so i am not that much surprised at the increase in cash circulation. the increase may stay for a while as long as theres immigration.
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Apr 11, 2006
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Mississauga
Well bank notes do have a life-expectancy, so part of the increase is for replacement, while the remaining is for increased demand.

Also, use cash so that less revenues go to banks and interac and the like.
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Jan 9, 2011
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kenchau wrote:
Apr 17th, 2017 3:58 pm
Well bank notes do have a life-expectancy, so part of the increase is for replacement
No, these numbers represent liabilities on the Bank of Canada's books. Notes returned for destruction are subtracted and the note that replace them added, so net zero on notes issued for replacement. These numbers are all increases in demand.
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Dec 12, 2009
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Toronto
kenchau wrote:
Apr 17th, 2017 3:58 pm
Also, use cash so that less revenues go to banks and interac and the like.
Just a FYI, banks do charge businesses for depositing cash.
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Oct 25, 2016
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Kiraly wrote:
Apr 15th, 2017 8:21 pm
You wouldn't hate loose change so much if the coin sizes actually matched the values they represent. The dime and quarter's sizes have been the same for 147 years. If you could buy a dollar's worth of stuff with a coin the size of a dime (which is actually how things were up until the 1960s) coins would actually be the useful things they were designed to be, and not the nuisances they have become.

True... because the were silver. That is how they held their value. A dime from then still buys a dollar of goods
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