Greece’s “Cash in the Mattress Indicator”

A Greek bank teller recently told a customer who was withdrawing 20,000 euros, “Had you come in last week without warning, I wouldn’t have been able to give you so much cash. We didn’t have the money.”

Cash Flight

Greek depositors are withdrawing their savings. Worried that collapsed Greek debt talks could lead to a euro zone departure and a return to the drachma, people in Greece want the security of having their euro cash.

You can see below that cash is indeed fleeing from Greek banks.

Where are we going? To the economic impact of cash withdrawals.

Hiding Places

Just like good investing advice, people are suggesting hiding place diversification. With robberies on the rise, a victim can hand over the cash from one spot and still have others that remain.

What are the possibilities?

In addition to their mattresses, people are wedging money beneath loose bathroom tiles and also burying it in the garden. They have figured out how to place a small box with money in an AC unit or to sew it in the pleats of draperies. And yes, mixing cash with food in the freezer is always an alternative (frozen assets??).

Our Bottom Line: Monetary Policy

Once euros flee Greek banks, they move beyond the reach of monetary policy. As banks’ reserves plummet, so too do the loans they can make. As a result, the money creation that feeds economic growth contracts.

I guess we could say that “cash in the mattress” is an inverse indicator of economic growth.