The FT published this chart this week, noting that for the first time the value of US $100 bills in circulation exceeds the value of $1 bills:
What really interested me is the fact that maybe 80% of these $100 bills are thought to circulate outside the USA.
And then there was this comment:
Former Treasury secretary Lawrence Summers has called for the $100 note to be scrapped to frustrate illicit activities, a move reminiscent of the European Central Bank's decision in 2016 to stop producing €500 notes with the same aim. But the cost of replacing the $100 note with more $50s and the cut in seigniorage, the profits a government makes from issuing currency, have hindered efforts.
So the US government ould rather profit from money laundering than take the bills out of circulation.
Which says rather a lot, I think.
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The legend on the chart suggests it is billions of notes rather than billions in value. So that would mean the value of $100 notes in circulation is actually one hundred times that of $1 notes. There are a lot of paper dollars outside the US, but that isn’t because they are all being used illegally. Some are of course, but Panama, Ecuador and Zimbabwe all officially (more or less) use the US dollar as their currency. Plus a lot of folk will prefer to keep some dollars rather than trust their local currency / politicians. It is interesting too, of course, that if you force the illegal activity out of legitimate currencies and into things like Bitcoin instead then clearly the proceeds of creating those currencies are also lost and go into private hands instead. Whoever the folk were who set up Bitcoin gave themselves enough coins to become billionaires after selling them.
A better solution to a lot of the illegality (which is around drugs) would be to decriminalise the drugs. Personally I would decriminalise all of them and regulate / tax them instead to varying degrees of strictness depending on their potential harm. But of course e.g. in the USA there is a multi-billion industry of police, jailers, etc etc all making a very nice living out of the ‘war on drugs’.
Looking further into the figures, over half of US currency (by value) is now in circulation (or squirrelled away) outside the USA…
For those feeling nerdy, the graph was previously in an IMF article at https://www.imf.org/external/pubs/ft/fandd/2019/06/what-makes-the-US-100-bill-so-popular-currency.htm ;and there is a Letter from the Chicago Fed at https://www.chicagofed.org/publications/chicago-fed-letter/2018/396 – which points (in note 6) to a paper now at https://www.bundesbank.de/resource/blob/635016/dd6ad2cca1c1819561bfc957833cd853/mL/2017-04-24-judson-data.pdf (they’ve reorganised their website) – graphs are at the end.