Cashless Sweden And Coin Collecting

Every central bank in the world states that they produce enough cash to meet demand. Politically it is a very safe statement to make.

But then the Riksbank publish articles that make statements like: Between 2000 and 2004, this unexplained cash demand has remained relatively constant at between 63 and 67 percent of the total currency in circulation
http://www.riksbank.se/Upload/Dokum...07/wp204.pdf

The conclusion of this report is that 63% and 67% of the cash in circulation in Sweden goes into the "shadow economy".

Since 9 July 2014 Sweden has been charging commercial banks when they deposit funds in their accounts at the Riksbank overnight. From 18 Dec 2013 to 8 July 2014 they held cash for free, and previous to that they used to pay interest to the commercial banks. This change has made handling cash for banks to be even more expensive than normal. Cash is usually a money losing operation for banks because it is so costly to count and store and defend against bank robbers.

So the deposit rate is set by the Swedish central bank to meet certain monetary policy goals (like controlling interest rates), but then the banks in Sweden are motivated to reduce their reliance on cash. You can see how little they keep in the banks relative to other countries. Keep in mind that it is not just a smaller percentage, but the country has also greatly reduced the absolute value of cash circulating in the country.

Percent of Banknotes and coins held in banks
Year	Sweden	Aust.	USA	Japan
2011	8.1%	14.0%	6.7%	10.2%
2012	7.8%	13.8%	6.8%	9.4%
2013	3.9%	13.3%	6.6%	10.5%
2014	4.3%	12.0%	6.6%	10.3%
2015	2.6%	10.9%	5.9%	9.7%

The banks are even more motivated to develop stuff like the very popular phone app, SWISH, which makes transfers of money from private bank account to private bank account very easy. Now they are developing "contactless cards" that will permit Swedes to make purchase of up to 200kr without entering in a Personal Identification Number.

It makes it much easier for an individual to reduce dependence on cash.

So it is not "supply and demand" like people prefer oatmeal cookies instead of chocolate chip cookies, so the store needs to stock more oatmeal cookies. It is more of a feedback loop where government policies influence the bank procedures which influences behavior of citizens which influences the amount of cash in everyday usage.

So at present exchange rates
100AUD= 655SEK

Change in value of banknotes and coin from 2012-2015 in circulation
-24.3%	SEK		21.3%	AUD
-80.4%	SEK 1000	32.0%	AUD 100
-12.1%	SEK 500		17.0%	AUD 50
-14.1%	SEK 100		-0.7%	AUD 20
-10.8%	SEK 50		9.1%	AUD 10
+06.2%	SEK 20		9.7%	AUD 5

Sweden posted on their government tourist website that the Riksbank was predicting that cash would be reduced by 20%-50% in the eight years from 2012-2020. Well they went down 24% in only three years, and the reduction has been over 10% in the first 9 months of 2016.

So the questions that remain is how far will they go before they stop? Will there be a backlash from conservative pro-cash groups in Sweden? What if there is a real estate crash in Stockholm? Both the real estate and the currency in Sweden shows up on lists as overvalued.

Almost everything in economics has an upside and a downside. I think that calling economics the "dismal science" is appropriate.

The loss of most cash bring a huge amount of efficiency to business and to people's lives and it allows much more control of illegal activities. But what happens when the business cycle changes?

Exactly how many 1000kr banknotes are stored away in the e central bank in case of emergency. But once they are out of the vaults of the central bank, they will probably stay in circulation for decades.

Is any country going to copy Sweden's lead. Norway seems the most likely. I thought that the British might diminish the number of £50 banknotes, but instead they increased the rate of circulation by a record amount last year.

Banknote numbers: The letters indicate the year in which the banknote was printed. A = 2013, B = 2014 etc. The two first digits indicate where on the printing sheet the banknote was printed. The final seven digits are a serial number.

I thought there were six digits in the serial number, not seven. That means there are 500 million possibilities (not 50 million). I humbly apologize for that mistake (tail between legs).
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http://www.atmmarketplace.com/blogs...ure-of-cash/
Too big to die?: Debating the future of cash
Sept. 28, 2016 | by Mike Lee

Debates like the one are pointless and distracting. Of course, cash can't be abolished.

The real question that Sweden is asking is can cash be limited in any way without damaging the economy?

The Euro area had a population of 306 million in the year 2000, and they had €380 billion equivalent in national banknotes which dropped to €270 billion by the end of 2001 as they prepared for the changeover. Although 15 million people were added as seven small nations joined the Euro zone, banknotes in circulation exceeded €500 billion by March of 2005, €1093 billion by Aug 2016.

Sweden is willing to admit that cash is a vital part of the economy, but they might be able to function with cash at close to 1% of GDP instead of 10%.

It was my understanding that the negative interest rates associated with the "deposit rate" in Sweden only applies to cash.

In Sweden Banknotes and coin held by banks is dropping 3.5x times faster than Banknotes and coin in circulation outside banks

At any rate here are the metrics in local currency for different currencies (sweden, USD, GBP, Euro, Switzerland, Japan).I also indicated SEK and JPY in USD.

Banknotes and coin held by banks (per capita)
year	Sweden	USA	UK	Euro	CHF	JPY
2011	850 kr	$232	£90	167 €	966	67,089
2012	780 kr	$252	£86	182 €	960	63,997
2013	348 kr	$257	£72	181 €	972	74,617
2014	370 kr	$279	£106	187 €	1019	75,332
2015	195 kr	$263	£80	185 €	962	75,183

Banknotes & coin held by banks in Sweden and Japan using then year x-rates (per capita)
year	Sweden 	~JPY
2011	$123	$866
2012	$120	$743
2013	$54	$711
2014	$48	$630
2015	$23	$624

So while Sweden never held much cash in banks relative to other countries, since the government imposed negative interest rates, the cash held by banks has dropped precipitously.

If I am not being clear, the general economic rule is that zero or negative interest rates usually mean people head to cash instead of banks. Sweden is bucking the trend partly by allowing the banks to avoid cash (outside of their ATMs) so that they have limited ability to get large denominations or large amounts of cash.

It's partly changes that are this abrupt to go from $120 to $54 in one year for banknotes & coin held by banks in Sweden that makes me loathe to call this change consumer demand driven. Personal habits change relatively slowly. But the bank is highly motivated to stop dealing in cash because of negative interest rates. I feel like there is a demand element since people get used to apps like SWISH, but I believe a lot of the change is coming from the government down down to the people.

https://en.wikipedia.org/wiki/Conta...#Floor_Limit

I suppose there are two different things. One is a "floor limit" which is the amount below which you don't have to sign or enter a PIN. In the USA that varies from retailer to retailer but places like home depot will typically permit up to $50. On the other hand "Home Depot" is not typically a place where someone will take a stolen credit card.

The second thing is the "contactless payments" which makes some people nervous. They turn off the function on their card. People are afraid of RFID chips.

Banks stopped carrying cash in Sweden for a variety of reasons. The one that is usually promoted is that it cuts down on bank robberies and makes it safer for bank employees.

But cash is inherently expensive to handle. You need people to count and recount, you have to lock up cash drawers, and petty thievery is always an issue. It's basically time consuming task with no real opportunities to add fees. The negative interest rates simply make cash even more expensive to handle.

I understand that Denmark is discussing doing away with cash machines in some retailers. I don't know if Sweden is also talking about doing the same thing. In the USA the problem of locking up a bar at 1AM and taking a pile of cash to the ATM for deposit is very risky.

Some high end retailers and occasional restaurants refuse to accept cash in the USA. Most apartment rental companies refuse to accept cash. A lot of gas stations will only accept up to $20 banknotes, and they are deposited into a safe onsite which the employee cannot get into. They display a large sign to that effect to discourage armed robbery.

Now it has been 33 months since the new 50kr, and 100kr banknotes were issued, and the cash supply of valid banknotes is actually slightly higher than it was 33 months ago.

While not a significant change, it does show that the march to cashlessness may not necessarily be pre-ordained. Society may simply want a minimum amount of cash.

Personally, I don't think the e-krona is going to kill cash. It will just be another type of electronic money. Please state otherwise if you disagree.

53.939 SEK billion Sept 2016 valid banknotes only
53.967 SEK billion June 2019 valid banknotes only

I was on a Caribbean island that was hit by a hurricane and lost all power for weeks. The island naturally switched to a cash or theft economy, but of course many of us couldn't get cash from the ATMs. We had to depend on the cash we were carrying to eat.

If the same thing were to happen in Sweden, it seems like many people don't have any cash on their person at all.

It looks like Swedes don't think about natural disasters much as they don't really have earthquakes or hurricanes.
Julorkanen 1902 was a strong European windstorm which struck Denmark and Sweden on 25 December 1902. Circa 50 fishermen were killed, while very few people on land were killed.

Generator sales are up, up, up.