NPR ran a story in August 2014 about a report coming out of Harvard suggesting that the United States kill off the $100 bill.
Here’s the NPR story, and my response.
Of all the U.S. currency in the world, nearly 80 percent is in $100 bills. That’s about a trillion dollars.
Some people want to get rid of the bill altogether. Ken Rogoff, an economist at Harvard University, says the $100 bill :
“Think about countries like Mexico, Colombia, where they’re really at war with the drug money, where the United States is not only buying the drugs but it’s providing this resource that very much helps the drug dealers.”
Richard Stratton is a former drug smuggler who benefited from the $100 bill. In one deal, Stratton brought 15,000 pounds of hashish into the U.S. But the $50 million deal left Stratton with a problem: He had to get all that cash out of the country and into his bank accounts in the Cayman Islands. Hundreds made the job easier.
And drug dealers aren’t the only ones that use $100s. Human traffickers, weapons dealers and all kinds of criminals love the bill.
But there’s also a good side to the popularity of $100s. The note is popular with ordinary people around the world who can’t trust their government or banks. About 20 years ago, the Federal Reserve saw vast sums of currency, especially in the form of $100 bills, leaving the country.
“At some point, Alan Greenspan said, ‘So, you know, how much is it?’ ” says Ruth Judson, an economist at the Fed. “And people didn’t know the answer. And we just thought that we should know the answer to a question like that.”
Judson spent years traveling around the world with a team of Secret Service agents and Treasury officials. They tried to map where all the $100s were. She says they found that as much as two-thirds of the currency was overseas.
But Judson is not convinced that the U.S. needs to kill the $100 bill. After all her traveling and sleuthing, she says, the Fed still doesn’t know how much of the money is being used for good and how much is being used for bad.
HERE'S MY RESPONSE:
The idea of taking notes out of circulation is not new. After all, there once were $500, $1,000, $5,000 and $10,000 bills, but the US stopped circulating them in 1969. The Mint last printed a $2 bill in 2003.
If you did away with the $100, you would have to up production of the $50 and also, drastically, the $20 because I recently heard that $20 bill production is currently at a 30-year low.
There would be further complications in that something like 2/3rds of all US currency circulates outside the US, creating a huge problem when it comes to recall.
That said, if you did away with the $100, you would hurt the drug traffickers who have stuffed tons of them under their mattresses.
But then, a similar scheme was contemplated back in the 1980s, with the $20.
Here is an excerpt about that from my money laundering book, THE LAUNDRYMEN (© Jeffrey Robinson)
Because the underground economy functions almost exclusively with dollars, the Reagan administration radically proposed a way to render the traffickers’ dollar mountains useless. They were going to change the color of money. In those days, the United States was the only country in the world whose currency was both the same size and the same color in all denominations. Reagan’s idea was to announce on a Monday morning that within seven days green $20, $50 and $100 bills would no longer be considered legal tender. Instead the government would be issuing newly designed banknotes, perhaps bigger, perhaps smaller, perhaps yellow, red or blue. All anyone would have had to do was walk into a bank and exchange the old notes for the new notes. But any cash transaction over $1000 would be recorded and the information would be passed on to the IRS and the DEA. For the average person it wouldn’t have been anything more than a nuisance. Even if someone always carried a few thousand dollars in his pocket, making the switch would take only a few minutes. But it could cripple a drug dealer with several million in cash hidden under his mattress. Swapping thousands of old $20s, $50s and $100s for the new money in such a short period of time, even using an army of smurfs, would be out of the question. And once the week was up, his cash mountain would be worthless.
The DEA even suggested that government might print two types of currency. One would be legal tender exclusively inside the country, the other would be legal tender exclusively outside the country. The only place the two would be interchangeable would be at specially controlled financial institutions. At least in theory, that should put an end to dollar smuggling.
For what it’s worth, this is where you’ll find the Kindle version of THE LAUNDRYMEN: amzn.to/1m3fZGr
Obviously, recalling the $20 bill didn’t happen. Recalling the $100 probably won’t.
However, the $100 bill is the least offensive of all the big denominations in the world. Number one reprobate is the €500 note.
For my take on that, I hope this amuses you, from a speech in Berlin.