Americans have been hoarding cash during the pandemic, presenting the Federal Reserve with an expensive challenge. Cash use at the till has declined slightly during the pandemic, as consumers accelerate the shift to electronic payments. But just like the period before a natural disaster, there has been a spike in cash withdrawals in the US.
Americans are using less cash but they are holding more, which presents a challenge for the Federal Reserve and other central banks around the world. They have to maintain a vast network of secure printers and depots to deliver cash to where it is needed. As people use less cash, each piece of this infrastructure becomes more expensive to operate. But central banks will not be able to wind it down completely, for two reasons. First, the poor are more likely to still use cash, exacerbating the “digital divide”. And second, in a crisis, everyone wants a fistful of dollars.