Money is a fascinating thing.
A man may work from sun âtil sun⊠but when that work week is done, itâs done.
Save for money.
As a âstore of value,â money suspends and stores the value of that weekâs work indefinitely, in a paycheck which can be left in his pocketâŠstuffed in a drawerâŠdeposited in a credit unionâŠitâs basic value unchanging across time.
Imagine now that paycheck made of ice.
Changes things, doesnât it?
Its bearer would certainly change his behavior.
He wouldnât dawdle on the way home, or stuff it in his pocketâŠheâd charge madly about trying to quickly convert it into: Groceries, car payments â anything, rather than watch it melt.
Regulatory institutions in Europe have now imposed this challenge on depositors, where (typically) 40 basis points are charged on deposited funds. (Deposit 1000 Euro, withdraw 960 one year later)
Already, corporations in that zone are pre-paying taxes and various expenses and liabilities rather than watch the funds dissolve.
Where possible, many are opting to hoard cash rather than deposit â weighing storage and security expense against the above 40 BPS.
Banks, based on the principle of positive interest rates, face tough sledding and a skeptical public.
âQEâ gave us more money, not necessarily velocity of money.
Obviously, the âPowers that Beâ want that money to move.