johannes beermann : maintaining a safe and efficient cash cycle in times of change speech by dr johannes beermann, member of the executive board of the deutsche bundesbank, at the south african reserve bank, pretoria, 4 december 2019. * * * 1 introduction dear johann, ladies and gentlemen, when trying to make sense of the many and varied individual transactions and decisions being made in an economy, economists like to think in terms of the circular flow model. in its most basic form, companies pay wages to consumers, who in turn purchase goods from companies. economists are very familiar with the basic principle : goods flows are matched by monetary flows of identical value – just in the reverse direction of flow. this way of thinking can be traced all the way back to a medical doctor. when, back in the 18th century, francois quesnay observed the various economic activities taking place around him, he is said to have been reminded of the flow of blood in the human body. as complex a system as the human circulatory system can be reduced to a few basic observations : at the centre lies the heart, which pumps fresh blood through a dense network of arteries to the various organs. this keeps the system up and running. the deoxygenated blood then makes its way back to the heart. we central bankers are arguably more comfortable talking about cash flows. but the parallels to the flow of blood in the human body are plain to see. and in the world of cash, too, it is essential for the system as a whole that every single organ involved works properly and in a coordinated manner. cash usage in both south africa and germany remains high. the south african reserve bank and the bundesbank are pumping an increasing amount of cash into circulation. demand for cash is on the rise. but times are changing. contactless payment methods are becoming more popular in germany and beyond. commercial banks, important elements of the cash cycle, are struggling with their existing business models. looking ahead, central banks need to ensure that their cash systems are fit for purpose. it is therefore a great pleasure to be here today to exchange views and learn from each other about potential future challenges. 2 internal cost efficiency in the cash cycle cash remains the most frequently used method of payment in germany for everyday transactions. three out of four purchases at the point of sale are paid in cash. german households value cash. this means that we need to maintain an adequate cash infrastructure. it is, after all, the bundes

available : the eu ( european union ) ’ s nextgenerationeu programme has €800 billion it can hand out up to 2027. a minimum of 37 % of expenditure is to be channelled into the green transition. on top of that, the eu ( european union ) cohesion fund has roughly €100 billion to spend in the 2021 - 27 period, which is also expected to serve green objectives. just to compare, the inflation reduction act has a volume of us ( united states ) $ 369 billion up to 2032. it is clear that europe must remain internationally competitive as a place of business. in my view, however, this issue should not be reduced to the question of subsidies. those are just one of many factors that firms consider when choosing where to do business. i would therefore like to take a broader perspective : europe can also become more attractive through a deeper single market. up to now, you see, we haven ’ t ( tonne ) exploited its full potential – not by a long shot. here ’ s an example : trade between two regions within europe is six times lower on average if they are not in the same country. [ 8 ] so national borders still play a major role. pushing ahead with economic integration in the single market is an ongoing task. work needs to be done, for example, when it comes to trade in services, the capital markets union and the digital sector. 3. 1 free trade in services it is partly by their very nature that services are more difficult to trade over long distances than goods. ordering a book in paris while located in berlin is easy. visiting a hairdresser is trickier. but this alone does not explain why there is so much less cross - border trade in services than in goods. [ 9 ] there are also home - grown barriers to trade. an analysis by the international monetary fund ( imf ( international monetary fund ) ) points to this : in the case of professional services, the high level of national regulatory density makes it more difficult to provide these services across national borders. at the same time, productivity in this sector has seen particularly weak growth in recent decades. there has also been little progress during this period in dismantling regulatory hurdles. the imf ( international monetary fund ) attributes this mainly to politicoeconomic factors. and it sees scope for reducing restrictions without compromising quality for consumers. in this respect, it would primarily be up to member states to facilitate market access, with