In places that celebrate Christmas, retailers face the usual year-end scramble to keep their shelves piled high. They will not be the only ones facing a seasonal run on their inventory: banks need to stock up for Christmas, too.
Just like eggnog, fruitcake and reindeer sweaters, demand for cash peaks in December, as consumers withdraw money to pay for Christmas gifts, tips and holiday travel (see chart). In the weeks leading up to the holiday, banks stash extra cash in their vaults to meet the additional demand. In the weeks that follow, as the beneficiaries of the Christmas rush deposit their takings, the excess cash is sent back to central banks and removed from circulation.
In rich countries, where card payments have become common, cash in circulation tends to jump by less than 5% in December; in America it hardly rises at all. But in emerging economies such as Brazil and Russia, where cards are rarer, it increases by over 10%. The world’s most cash-crazed consumers are in China. Chinese New Year, which typically falls between mid-January and mid-February, boosts demand for cash by over 20%.
© The Economist Newspaper Limited, London (December 19th 2015)