"...The world-wide interest in holding cold, hard dollars is driven substantially by fear. The surging demand for cash has happened despite broad worries about the dollar’s value at a time of U.S. economic malaise and radical monetary-easing measures by the Fed. The cash surge is largely separate from the central bank’s liquidity providing market interventions. Demand for cash has increased even as the dollar has had a rough few months relative to other major currencies, and as some investors have flooded into gold out of fear that the greenback will lose its value.
While the financial system’s is healthier than it was during the darkest days of the financial crisis, a sense of unease persists in many quarters. Many still worry about newfound trouble in banks. The broiling European debt crisis, which raises questions about the future of the euro, the dollar’s chief rival, also makes paper dollars more attractive to a wide range of prospective holders, many of whom are outside of the U.S..."
at http://blogs.wsj.com/economics/2010/12/08/demand-for-us-cash-surges/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29
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