has a view on. research, of course, has to go beyond mere expressions of opinion. central bankers and researchers in the area of cash need to understand the fundamental drivers of cash circulation 1 / 5 bis central bankers'speeches and establish microeconomic evidence on cash usage. cash passed the conceptual stage centuries ago. it has been around ever since. cash is the only legal tender and, as such, it forms the basis for its cashless alternatives. going “ all cashless ” without the backing of a national unit of account is difficult to imagine. there always has to be the option to convert deposits into legal tender and the other way around. that is why research on cash is at least as relevant as ever. in a way, this means going back to the roots and asking the fundamental questions. as the title of this year ’ s conference suggests, we are living in the age of payment diversity. diversity is actually a concept derived from sociology. it implies that you recognise individual characteristics and allow for the inclusion of a range of people or objects. cash has several of those unique characteristics which greatly add to the diversity of existing payment instruments. first and foremost, cash is money because it fulfills fundamental macroeconomic functions. it acts as a store of value, a medium of exchange and a unit of account. let us briefly go through these well - known textbook functions in turn to see what they imply with respect to cash usage. 2 cash as a store of value ladies and gentlemen, as we will be talking over the next couple of days about cash usage in different countries, allow me to set the scene a little bit for germany. central banks “ make money ” in quite the literal sense. the physical banknotes we produce are our main output and, as such, straightforward to measure. the value of euro banknotes in circulation is growing. by the end of 2018, total banknote circulation exceeded 1. 2 trillion euros, and it is still on the rise. just like any other commodity, cash gets around. it crosses borders and switches hands. a considerable chunk leaves the euro area altogether. at the end of the day, about one - quarter of the total value of banknotes in circulation remains in germany, which is roughly in line with the domestic economy ’ s share of aggregate euro area output. of course, households use cash for transactions, but they use it even more so as a store of value. our estimates for germany suggest that around three out of four banknotes held domestically end

jens weidmann : of credit and capital – what is needed for an efficient and resilient financial system? speech by dr jens weidmann, president of the deutsche bundesbank, at the iif ( institute of international finance ) europe summit, frankfurt am main, 25 june 2015. * 1. * * introduction ladies and gentlemen thank you for inviting me to speak here before you today. the former italian president sandro pertini is quoted as joking that speeches were always harmful. “ before lunch they spoil people ’ s appetite, and after lunch they spoil people ’ s digestion. ” with this in mind, i ’ ll try to be brief so that the immediate effect of my speech should – hopefully – be limited. but lunch is actually an excellent cue, for it calls to mind one of the fundamental principles of economics : “ there ain ’ t no such thing as a free lunch. ” interestingly, though, the phrase was coined not by an economist, but by the american science fiction writer robert a heinlein. although it may have come from the pen of a science fiction author, this adage has proven to be far more durable than many theories put forward by economists. and the fact that you now have to sit through my speech would strongly suggest that robert heinlein might have been onto something here. that something is a pretty fundamental insight : that each and every economic decision involves a trade - off that needs to be factored into that decision. as such, economic decisionmaking is about weighing benefits and costs, about striking a delicate balance. take central banks, for instance. the task of monetary policy is to find the interest rate that neither chokes off the economy nor causes it to overheat. only in balance will inflation be low and stable – and this is usually a central bank ’ s mandate. economist knut wicksell termed this rate the “ natural rate of interest ”. and striking the right balance is the core challenge with regard to another central bank function as well – its role as lender of last resort. overly restrictive provision of liquidity in times of financial turmoil might fail to quell the upheaval – possibly causing a conflagration. but providing too much liquidity for too long might end up causing problems as well. if nonviable banks are kept on life support with central bank money, they will go on to make evergreen loans to non - viable companies – a situation which heightens the risk of