Circulation of the recently-scrapped €500 note had increased too in recent years, likely in response to the European Central Bank’s introduction of negative interest rates. If you look at the ECB’s figures for €500 note circulation, you’ll see that circulation of the note began to take off in earnest after the ECB’s second negative interest rate drop, which occurred just before the Swiss central bank moved to negative interest rates. Apparently Europeans must have though the drop to -0.10% was a fluke, but the push to -0.20% made them realize that the ECB was serious and the Swiss move compounded that. It will be interesting to see what effect the abolition of the €500 euro note will have on circulation of the €200 and €100 notes, as one would expect to see their circulation increasing as a result of increased cash hoarding and the elimination of the €500 note.
You would think that central bankers would have learned their lesson by now after over a year and a half of experimenting with negative interest rates. The more expensive it becomes to deposit money in banks, the less money will be deposited in banks. The less money is deposited in banks, the less money banks have to lend. So why are central bankers imposing negative interest rates in the hopes that it will spur lending? The only way to make up for the decrease in deposits is for the central banks to engage in more money creation, through more quantitative easing. But QE failed to do what central bankers thought it would do the first half dozen times they tried it, so why would that work now when it hasn’t worked before? The definition of insanity is doing the same thing over and over again and expecting a different result. It appears that central bankers around the world really are insane.
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