Dictionary definition of “flight to cash”

flight to cash

n. a sudden widespread selling of investments, or their rapid conversion from illiquid to liquid, in anticipation or belief of an unfavorable or unsafe market; a sudden widespread withdrawal of bank deposits. Subjects: English, Business, Money & Finance, Jargon

Editorial Note: A “flight to cash” is more measured than a panic or sell-off, in which investments or assets are hurriedly sold at a loss in order to avoid what is already an unfavorable market.

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Citations: 1978 Globe and Mail (Toronto, Canada) (January 20) “British financial crisis averted by ‘lifeboat’” (in London, United Kingdom): But there were persistent rumors in 1974 that the banking system was in danger, Mr. Richardson said. Without the boost of confidence from the Lifeboat, those rumors might have become self-fulfilling, and if one major bank had collapsed, I do not know where we would have stopped. At the time, stock market and property values were collapsing after a long upsurge begun in the 1960s, touching off a flight into cash. 1986 Terry Byland Financial Times (United Kingdom) (Feb. 17) “Wall Street: Dilemma Of Oil Benefits”: This in turn, it comments, could mean trouble for many small US banks, and some big ones, too, and could bring a flight to cash and precious metals and eventually a world recession. 1998 Nicholas Snowden Development Economics and Policy “The IMF as International Lender of Last Resort? A Reappraisal after the ‘Tequila Effect’” p. 424: Goodheart argues that modern bank runs have not involved a flight to cash but simply a rush to transfer deposits to institutions viewed as relatively safe: problems at individual banks have not produce a generalized crisis. 1998 BBC News (United Kingdom) (Oct. 13) “Business: The Economy; Corporate bonds bomb”: Last week, investors fled even the safest of all bond investments, the US treasury long bond, in a flight to cash. 2006 Trevor Wilson Myanmar’s Long Road to National Reconciliation (Aug. 30) p. 81: With a full-scale banking crisis now in play, there followed the usual symptoms of such events—bank closures and insolvencies, a flight to “cash,” the creation of a “secondary market” in frozen deposits, the cessation of lending, the stopping of remittances and transfers, and other maladies destructive of monetary institutions. 2007 Gene Arensberg Resource Investor (Aug. 12) “Got Gold Report—Big Markets Worry, Gold Market Sleeps?”: Isn’t it odd that when a financial crises threatens to get underway today hot money rushes to turn just about everything into fiat paper dollars? In something that has come to be called a “flight to cash,” for a little while it seems that just about everything is being sold at the same time, equities, commodities, even gold and silver.

Posted 13 Aug 07 | Permalink | Tell a Friend