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Cashless Economic Growth
The share of cashless payments by the public and private industry in recent months has grown so fast that the Central Bank has practically no demand for new money. The Bank published data on Friday indicating that it was forced to increase the amount of cash money in public circulation to 3.26 trillion rubles in June of this year, after starting the year with 3.07 trillion rubles in circulation.
Data on the growth of aggregate M2 (general money mass) since the beginning of the year show that almost the entire growth in the volume of money in the economy (at the level of 50 percent annually) is due to cashless payments. Indicators of the growth of turnover in retail trade in the first half of the year (14.2 percent in real terms, that is, taking account of inflation, almost 20 percent nominally) and the growth of public spending (19 percent) do not give cause to think that there is no public demand for more money. It is also a matter of the comparison of the dynamics of the development of cashless technology and its public acceptance with the record growth rate of M2. A comparison of M2 and M0 (money in circulation outside banks) shows that the share of cash in economic turnover, which has been slowly sinking since 2002, began to fall faster in 2006.
It is noteworthy that the decrease in the demand for cash in the Russian economy is to a great extent a consequence of salaries out into the open in Russia. Payment cards can be used by companies for semi-legal payments as well, but the archaic system of payment of salaries through cashiers is almost always eliminated in the interests of economizing when salaries are made more transparent. This is a process of massive scale and it reveals a paradox. The rapidly growing Russian economy, in spite of 8-9 percent annual inflation, will soon not need any more money.
www.kommersant.com
All the Article in Russian as of Aug. 06, 2007
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Photo: Roman Yarovitsin
