[Dave Birch] One of the problems with reading the newspaper is that it often undermines your faith in universal suffrage. We try to be sensitive — politically correct, even — so it’s considered bad form to call the public stupid.. But I’m afraid I must ride roughshod over the conventions of polite society and say this: a substantial fraction of the general public are undoubtedly just that. Remember this…

The number of people who think the best place to keep their money is under their mattress has nearly trebled during the past year, figures show. Around 11 per cent of people said they now thought their money was safest under their mattress, compared with four per cent 12 months ago, according to Newcastle Building Society.

[From 1 in 10 ‘thinks cash is safer under mattress’ – Telegraph]

Ask yourself this. What proportion of the population have more than 33K in cash (the current deposit protection limit) and therefore might rationally want to forego interest income on the excess on the grounds that the banks might collapse? Let’s say, 2% (of whom 1% might be tax-avoiding pop stars, drug dealers and so forth). But 11 percent? I think not.

And why wouldn’t they buy gilts instead if they don’t want to touch banks or the stockmarket? Maybe these people can’t do simple mathematics. There are no circumstances, surely, where it makes more sense to leave the money under the mattress. Having said that, it’s surprising how much of it is: The proportion of euros in circulation that are in the form of 500 euro notes is way higher than you might think. After all, 500 euro notes are very desirable to certain groups within society. Central bankers, for one example. Money launderers, for another. As the British police put it….

The beauty of the 500 euro note is that it’s the highest denomination that is universally accepted. So they can convert a suitcase-worth of sterling into a quantity of euros which will fit in a small box.

[From BBC NEWS | UK | Raids target £100m drugs network]

I mean, it’s none of my business, but why are there 500 euro notes at all?

Talking about deposit insurance, which we were tangentially,

If the U.K. is going to offer deposit insurance, my suggestion would be to set the limit to cover the total deposits of say 98% of all depositors (£35,000 might be sufficient), and eliminate the coinsurance feature (insure 100% to £35,000).

[From Calculated Risk: Deposit Insurance: U.K. May Increase Coverage]

Sounds calculated, rational and reasonable. Let’s see what happens…

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

1 comment

  1. > I mean, it’s none of my business, but why are there 500 euro notes at all?
    Because there are so many unbanked people? We could as a society decide that banks must serve all with accounts, but taking away competitive choice breaks so many things that the result is generally unfriendly, in a Hayekian sense. There needs to be leakage in the system otherwise the system eventually explodes. Or implodes.

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