The quarantine is paid in cash: the Argentines withdrew a record of almost $ 90 billion in banknotes in the first 10 days of isolation

The preventive and compulsory social isolation decreed by the National Government turned families and companies towards the use of cash in unprecedented dimensions for this part of the year. The need to have tickets to meet basic necessities had its main manifestation in the crowds of retirees, pensioners and beneficiaries of other assignments of the Anses last Friday, the unforced error that affected efforts to keep at bay the rate of expansion of the coronavirus COVID-19. But it goes further, to the extent that people accumulate banknotes in a similar way to what was seen with food or cleaning products in the first days of the disease, putting pressure on the system and even the mint to maintain the supply of tickets.

Cash held by the public, which is held by individuals and companies outside banks, reached $ 1,119 trillion last April 6, a historical nominal record that, although largely explained by inflation, implies a spike in the number of physical tickets on the streets that does not coincide with this part of the year.

Comparisons are difficult due to the effect of inflation on nominal values, but they are still eloquent.

In just 10 business days, since the imposition of the mandatory quarantine, $ 88,598 million pesos in tickets came onto the street. The change in cash preference is dramatic: In the previous 10 business days, the amount of money held by the public had fallen by $ 2,189 million. And throughout the year until the day before the social distancing decree, $ 22,613 million had been sued by individuals and companiess.

More numbers that give a dimension of what happened at ATMs across the country. As of April 6 of this year, the latest available data, the nominal amount of cash held by the public had grown 11.02% compared to the first day of the year. The normal thing at this time of year is that the nominal amount of physical money on the street is less than the beginning of the year, after the peak of demand for money of each month of December.

For example, on the same number of business days in 2019, cash held by the public was 4.17% less than on the first business day of the year. In 2018, 4.92% lower and, in 2017, 3.03% lower. The pandemic changed emergencies this year. The peak in use of cash is similar to that seen each year in June and December, when the Christmas bonus is paid.

People are hoarding physical money because of doubts“, said Juan Manuel Pazos from TPCG.

A report by that firm argues that there is a conflict between two money technologies that coexist in Argentina, that of electronic money (blank and regulated) and that of cash, with a disproportionate weight of the latter given the enormous portion of the economy that is managed in black. The latter, badly hit by the mandatory quarantine.

“The diagnosis of the Central Bank is that it can issue silver because it is in a liquidity trap, but we believe that this is another problem with the supply of physical money. Physical money stopped circulating overnight because that part of the economy is stopped. The Central responded by issuing at full speed to compensate for that, but what it issues is too much electronic money to try to boost the other world, that of cash. It may be the right thing today, but what will happen when we return to work more normally? The Central is going to have to raise the rate and suck money, something that I do not think that the Economic Cabinet allows in the midst of an attempt to recover post-quarantine. The monetary situation is very tense. Some of that may be explaining the rise in cash with liquidation, “Pazos told Infobae.

Since before the COVID-19 virus came to the center of priorities, 2020 was already an unusual year on a monetary level. The stocks imposed in September and reinforced after the presidential elections in October made it possible for the Government to allow a rate of monetary issue – beyond physical notes or currency with a purely electronic existence – much higher than in previous years, without fear of a shot at the dollar in the formal market (another is the story with parallel dollars).

This margin, given by the forced demand for money that implies the suspension of the ability to convert pesos into foreign currency, was also used to cover Treasury financing needs that could not be covered with genuine income or debt placement in the market. That kept the availability of cash in the hands of the public above normal, but the acceleration in recent weeks is of a different nature. But the pandemic took the numbers to a new level.

Banknote thirsty

In recent days, bank desk operators pointed to the anomaly. In the Electronic Open Market (MAE), where among other things the Leliq are operated and the wholesale exchange market is sustained, there is a wheel dedicated to the exchange of banknotes for electronic pesos (in the jargon, MEP pesos). In this system, called the “NUMA wheel”, banks with surplus physical bills exchange them with entities in need of physical money. Typically, they are the “paying” banks that have many retirement accounts and other allowances that are transformed into withdrawals of tickets through windows and ATMs every month.

Last Monday $ 23,000 million in physical pesos were operated on the NUMA wheel, according to bank operators, to the extent that retirements, AUH and other assignments from Anses were paid. In addition to starting to collect the Emergency Family Income (which injects about $ 36,000,000 million in total, but has not yet finished paying) and banks were trying to accompany the needs of tickets at ATMs and windows.

The MAE does not make public the data of the NUMA wheel, officials of that market preferred not to respond to the request of this medium, but in the system they talk about an effort to meet the needs of paper money shortly before seen.

This is seen in the numbers of cash in financial institutions, which also hit a peak as banks need to accumulate banknotes to meet demand.

“The recharge of ATMs is at maximums. Even the Mint is going to be required if this is extended, ”they said in one entity.

In this context, one of the Central Bank’s main concerns is to keep ATMs supplied, particularly in this long weekend that combines quarantine with Easter holidays.

The entity led by Miguel Pesce said he had implemented “the pertinent measures to reinforce the distribution of banknotes among financial institutions that guarantee the recharging of ATMs with sufficient cash and meet demand during the long weekend of Easter

The Central also ordered the suspension of all charges and commissions for operating with ATMs, and also forced banks to raise the daily withdrawal cap from automatic terminals to at least $ 15,000 per day, in an attempt to prevent appetite for money. cash generate crowds like those seen last Friday when banks reopened for retirement payments.

The race to get tickets is not just Argentina. According to the North American portal Quartz, citing data from the Federal Reserve, cash withdrawals and the transfer to sight accounts during this pandemic are the most important and abrupt since the beginning of the century.. The last time Americans stocked banknotes and money on demand into their accounts so regularly was shortly before the end of 1999.

At this time, fear of Y2K – it was feared that the change of the first two digits in computer dates in the passage from 1999 to 2000 would alter systems, including financial ones – made Americans prefer not to take risks and had money as close to hand as possible.

Now, in the midst of the COVID-19 health crisis, the preference for physical money is also fueled by the flight of small investors from risky assets, given the collapse of markets around the world.

Written by Argentina News

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