UK Bank Notes and Coins in circulation & on deposit.

The only lady of Threadle Street, The Bank of England [http://www.bankofengland.co.uk] has some very interesting statistics that gives an insight into the UK economy.

http://www.bankofengland.co.uk/statistics/documents/fnc/2014/may/notesandcoin.pdf

This shows the amount of cash in circulation, and also the amount of money the UK banking sector has on deposit with the UK Central Bank, The Bank of England.

In May 2014 from reading the Bank of England press release we see:

£67,558 million = £67.5 Billion of notes and coins are in circulation. So this tells us the physical cash being used in the economy, this is money in banks and building societies that is available.

What is very interesting is the amount of cash that the UK banks and building societies have on deposit with The Bank of England.
£304,891 million = £304 Billion that the “clearing banks and building societies” have deposited with The Bank of England.
Money that is earning the 0.5% The Bank of England Base Rate.

Perhaps this is some level of insight, into the risk adverse nature of the banking sector, money that has been saved by the banks and then put onto deposit with the Bank of England, rather than being lent out to consumers or businesses. Or perhaps there is not the demand from consumers and businesses to borrow from the banks.

Either way, it is incredible to see that the Bank of England has £304 Billion on deposit from the UK banking sector.

This is why one reads about the potential benefits of “negative interest rates” at the central bank. A way to increase lending, is to create the negative interest rate environment where clearing banks are penalised by negative interest rates with cash on deposit at the central bank, and then this creates the incentive to lend money to businesses and retail consumers and make a real return, this is what has been discussed with the ECB in recent weeks.

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