Another edition exclusively for paid subscribers this week. We start with a look at a company whose business it is to make banknotes, then look at the equity research industry in light of the AllianceBernstein deal with SocGen, before turning to Petershill – a Goldman Sachs fund that invests in fund management companies – and Credit Suisse (sigh, again). If you’re not already on the list and want to join, you can sign up with a seven day free trial here. As well as fresh content, paid subscribers also get access to a fully searchable archive of over 100 issues.

Get 7 Day Free Trial

Printing Money

The Netflix TV series Money Heist was a surprise international hit during the Covid lockdowns of 2020. Set in Madrid, it follows the exploits of a gang of eight criminals, recruited by a master tactician, “The Professor”, as they carry out an ambitious plan to raid the Royal Mint of Spain and escape with €2.4 billion. 

As a show, it’s pretty good – it certainly kept me entertained in those early days of lockdown. According to Netflix, it drew in around 65 million viewers in 2020. For a while, the Dalí masks worn by the robbers became ubiquitous throughout popular culture.

The show also provides an insight into how a money printing operation works. The Professor calculated that it would take 11 days to print €2.4 billion worth of banknotes. His plan was to mobilise hostages to keep the police at bay for that amount of time. Meanwhile, one of the team, known by her alias, Nairobi, was to oversee the printing presses. Yet it seems the Professor may have overestimated the productivity of the presses. With a police showdown inevitable, the gang had to flee after six days. Even with the printing operation working at full tilt, they were only able to make off with €984 million in cash. 

Outside the realms of drama, managing banknote production capacity is an actual problem that central banks face. While cash usage is in decline across the world as electronic payments take over, demand for cash still remains very high and central banks need to maintain it. Throughout Europe, there are currently 29.1 billion banknotes in circulation (including 14.2 billion of the kind of €50 banknotes Nairobi churned out in Money Heist).

In Spain, banknotes are printed by a specialist company 80% owned by the Bank of Spain and 20% owned by the Spanish Royal Mint. Printing doesn’t take place in the building portrayed in Money Heist – the show’s producers used the more photogenic Spanish National Research Council – but it does take place in Madrid. In fact, banknote production is currently being transferred to a new state-of-the-art site in the Vicálvaro district of Madrid. 

But sometimes, central banks need to draw on excess capacity and turn to third parties to supplement their printing. This happened at the outset of the pandemic when central banks wanted to stock up and it may happen again as inflationary pressures increase the demand for cash. In such cases, central banks sometimes turn to De La Rue plc. ...