Should we ban the $100 bill?

by on February 29, 2016 at 12:52 am in Economics, Law, Uncategorized | Permalink

Ashok Rao has an excellent post on this question, and it is not obvious that a ban is in order.  Here are a few parts of his multi-faceted argument:

  • There is an information tradeoff. Imagine if criminals transacted only in $10,000 notes. It would be reasonably easy for intelligence agencies to sneak a traceable note to probe criminal networks. This would be close to impossible with a $20 note (not the least because this is a high velocity note used by normal people).
  • Citing the high use of $100 among criminals doesn’t mean much. Of course criminals use the lightest / most compact / highest denomination currency at their disposal. Therefore suggestions along the lines of “n% of criminal activity is transacted in $100 bills” mean little because if we got rid of the $100 and managed to avoid the problems noted in point (1) it would be the case that “n% of criminal activity is transacted in $20 bills”.

I found this information on premia interesting, note the premia serve as an implicit tax for trading in $100 bills, though I wonder who exactly reaps that surplus?:

  • Screenshot 2016-02-27 18.02.18.png

Finally, Ashok tells us this:

Would we not be hurting innocent people in oppressive regimes? Aren’t there autocracies in Africa and Eastern Europe that use HDN [high denomination] dollars as a means of trade in otherwise embargoed necessities?


1 Stephan February 29, 2016 at 1:04 am

Leave those $100 alone, There are a lot of things that criminals use that law abiding citizens also use : guns,cars planes, lawyers, etc..We already have the abusive asset forfeiture laws.
It’s government oppression, next step cash will be outlawed.

2 Dan Weber February 29, 2016 at 11:03 am

Why does everyone in this thread, author and commenters, forget the $50 bill? It’s printed and in use.

3 Frederic Bush February 29, 2016 at 1:09 am

I have played poker for several years, where bets and payouts are routinely conducted using $100 bills. It’s hard for me to imagine using $20s to pay for things costing in the thousands. Generally $100s are used in low-trust environments where people scrutinize the bills for counterfeits and count the payment in public, multiple times. It would be extremely time-consuming to do that with $20s unless you had a counting machine, which is not something you generally want to be carrying around.

4 Frederic Bush February 29, 2016 at 1:23 am

To put this in concrete terms, a packet of 100 bills is comparable in profile to a thick wallet filled with cards. So it’s pretty easy to walk around with $10k in $100s in your pocket — it’s like having a wallet.

Now imagine walking around with five wallets, to represent that $10k in 20s. It’s doable, I suppose, but it would be uncomfortable and bulky. The difference in portability is not trivial.

5 Mark Thorson February 29, 2016 at 1:34 am

Would Canadian gold coins be a possibility? They start at 1/20 ounce, which is what? About $75? That’s a very small coin. Not much risk of counterfeit coins, and wouldn’t it be much more fun to gamble with gold coins?

6 Moo cow February 29, 2016 at 10:13 am

You would have to calculate how many chips those coins would buy each day, plus you would likely lose so much to transaction costs as a days grind unprofitable.

7 Brian February 29, 2016 at 1:27 am

I get a 2% bonus for trading in Franklins in Mexico.

We should be printing up a $300 note to facilitate more transactions and compete with big Euro notes. (“100x gayer than a $3 note,” could be the slogan, printed directly under “E Pluribus Unum.”)

8 Mark Thorson February 29, 2016 at 1:44 am

Big Euro notes are also threatened with phase out.

9 Moreno Klaus February 29, 2016 at 5:08 am

…And rightly so.

10 Dan Weber February 29, 2016 at 11:42 am

That begs the whole question of “does this really make it any more inconvenient for criminals?”

I could see counterfeiting concerns as a reason to not have HDN.

11 Dan Lavatan February 29, 2016 at 1:33 pm

I think if we bring back the 10k bills (we should be on offense, not defense) they could embedded a tamper-resistant chip in them with a digital signature.

If the feds won’t do this, then we need to move to private currency in the form of commodity-backed warehouse receipts.

12 Dan Weber March 1, 2016 at 10:47 am

There’s no need for a “digital signature,” you can just track the serial numbers.

I kind of assume that banks track large-denomination notes by serial number every time they go into or out of the bank. This would be impossible 20 years ago but trivial today. Unless there is some law or strong cultural force within banks resisting it, it’s the kind of thing regulators would insist upon.

13 Nedim February 29, 2016 at 1:39 am

Banning the $100 bill would effectively end US$ as the “reserve” currency in hands of people in non-1st world. Clearly Summers can not even imagine how life looks like in the non-developed world.

In a system where you can not trust banking you keep your life savings in foreign currency of a trusted country. It has to be hidden and is utilized in high-value transactions (like buying a car or piece of land). Having to use $20 bills would end the use-case. (not to mention the logistical problem of exchanging and supplying all those $20’s). The US$100’s would by necessity have to be replaced by other high denomination bills, be it Euro’s or Yen or RMB or Swiss Franks. A large part of the $750B would be (permanently) exchanged over some period and float back to the US. This would not be inconsequential, for exchange rate, currency and country status.

It is one of the dumbest ideas I have heard in a long while.

14 Cass1an February 29, 2016 at 2:43 am

Reminder: highest RMB note is 100, ridiculously small (it’s not even $ 20, it’s $ 15). Chinese capital controls are there to blame for that.

15 Axa February 29, 2016 at 3:16 am

First time I read people in developing economies prefer 100 USD bills over gold/silver.

16 Nedim February 29, 2016 at 10:27 am

I have encountered exactly 0 transactions involving gold/silver, unless it was specifically buying heirloom jewelry with no intention to trade it in.

I have also never seen any black market exchanges with guys standing on the corner with gold bars or coins in their pockets.

17 Axa February 29, 2016 at 10:50 am

There´s no need to look for the gold black market. Pawn shops are 100% legal and poor people use them a lot.

18 zbicyclist February 29, 2016 at 10:44 am

In January, I went to Kenya and Tanzania. We were warned that the Tanzanian visa (obtainable at the border) required a new series $100 bill.

The explanation given was that the new series $100 bill was easier to check for counterfeiting.

And, indeed, they rejected some of our group for not having these (I had to trade two other travellers for their older $100s or $20s).

The idea that eliminating the $100 bill would have any effect on crime seems to me to be hopelessly naive, like eliminating watches would stop time.

19 poorlando February 29, 2016 at 3:36 pm

In Vietnam, I went to a jewelry store/money changer that charged me a very small percentage discount for trying to exchange a 100 dollar bill that was more creased than the lady at the counter would have liked. Generally, new, crisp (100) dollar bills do hold a sort of premium in that country. When giving gifts, you would never give old tattered or even slightly worn bills.

20 anon February 29, 2016 at 3:15 am

Resident of Ukraine reporting. There’s no premium whatsoever for $100 bills here — 0%. FX market is quite robust here, 10% would get arbitraged away immediately.

I recon the rest of the data is as reliable. What a load of hogwash.

21 anon February 29, 2016 at 3:24 am

(when I wrote FX I meant currency exchange instead)

22 Deek February 29, 2016 at 4:54 am

I’m also leaning towards the hogwash assessment and might go as far as poppycock.

These premia may be present in banks but most of the world exchanges their money at little hole in the wall obmen valyuts where I’ve never encountered any penalty for changing $100 notes.

However, I have been charged extra for trading BOS, RBOS and Clydesdale notes over Bank of England ones.

23 Ricardo February 29, 2016 at 5:34 am

It’s a premium not a penalty. You get more, not less, for your money if you change a $100 bill for local currency. Here is an example from the popular Thai company “Superrich” that operates currency exchange kiosks in the country. Right now, a $100 bill will get you 3,562 baht but 20 $5 bills will get you 3,537 baht. That’s a premium of 0.7%, not 3-5% so you and anon are right to call this source out for dubious data but the premium is still real.

24 anon-ua February 29, 2016 at 8:27 am

To support my claim of no premiums in Ukraine check this:
That’s an illegal market for currency exchange (here’s another ).

What you see in the table on that page are outstanding orders. The text describes the location where the exchange would take place, if they would accept partial fulfillment, if there’s a fake bill detector on hand etc. Markets like this are also sometimes used to set up and rob people who bring too much currency to an untrusted counterparty w/o sufficient security.

The rate right now is 27.20/27.25 which is 0.2% of spread. And believe me, that rate is for $100 bills, there’s no space for discounting other denominations. The spread is usually slightly wider but still <1%. Most of USD cash exchanged is in 100 bills, so the rates assume that too. So in case of Ukraine I can confidently say the premium is exactly 0% (and always was).

25 ZZZ February 29, 2016 at 9:58 am

0.7% can probably be explained by the higher cost to count and transport a larger number of bills.

26 Todd Kreider February 29, 2016 at 3:37 am

Just a friendly reminder that Tyler just linked that housing prices were at 2007 levels but didn’t say those were nominal prices not adjusted for inflation.

What economist does this? Well, a blogger that doesn’t care.

“Should we ban the $100 bill?”


27 Moreno Klaus February 29, 2016 at 5:11 am

I think Tyler is an intelligent person… but yeah he doesnt seem to care… This blog would benefit tremendously, if the number of posts would be reduced to one per day maximum. Maybe one with links and one like this one, but then with a much more careful writting and analyses. Why doesnt he do that???

28 Slocum February 29, 2016 at 6:40 am

I disagree. Keep the filters turned down and the posts coming. The community vetting is at least half the fun.

29 Tyler Cowen February 29, 2016 at 10:51 am

Check out the y axis for the price index, Todd…

30 VivianDarkbloom February 29, 2016 at 1:22 pm

The HPI that the St Louis Fed is reproducing in that graph is derived from the US Federal Housing Finance Agency. The latter agency indicates, in its FAQ with respect to how the index is calculated, the following:

Is the HPI adjusted for inflation?

No, the HPI is not adjusted for inflation. For inflation adjustments, one can use the Consumer Price Index “All Items Less Shelter” series. The Bureau of Labor Statistics’ price index series ID# CUUR0000SA0L2, for example, has tracked non-shelter consumer prices since the 1930s. That series and others can be downloaded at:

So, it appears the “index”is an index of *nominal* house prices.

31 Nathan W February 29, 2016 at 4:34 am

Virtually no one doing large legal transactions these days does them in cash. If large transactions are done in cash, it is virtually certain that one or the other of the participants is up to something dodgy.

However, I would oppose moves to ban large denominations unless accompanied by extensive genuine sounding defenses about the importance of anonymous payment mechanisms, in terms of liberty and the potential of some future spy state to monitor every last economic transaction of every individual, which would allow them to create virtually complete profiles on preferences, making is altogether too easy to stick and carrot them at the individual level to the point of essentially brainwashing them. I.e., this should not be the slippery slope to a cashless society with a potential for universal monitoring of transactions, and only a very strong defense supportive of such concerns would mute such concerns.

An added bonus is that, while a reasonable exchange period could be made for people who legally hold large amounts of high denomination currency (6 months, with reasonable additional avenues for those who were overseas and could prove the legal origins of their cash?), it would virtually bankrupt many cartels, terrorist groups and tax evaders overnight.

Aside from nearly bankrupting all sorts of dodgy types, it would increase the detection risk for these very same groups while posing virtually zero cost on those who follow the law, given that large legal transactions are almost ubiquitously digital these days.

I would suggest that such a move should be accompanied by a temporary hike to human resources for organizations which specialize in detecting financial crimes such as money laundering, since the cartels et al. would presumably rush to do anything they could to launder this money rapidly before losing everything.

32 Ray Lopez February 29, 2016 at 9:59 am

But diamonds are a terrorists best friend,see:

You can pack a lot of value in a pink diamond….couple of hundred million dollars worth and it fits in a tube of toothpaste and is undetectable by X-rays.

33 ZZZ February 29, 2016 at 10:01 am

You’ve never bought a used car? Cash only from private sellers.

34 gab February 29, 2016 at 12:51 pm

I was thinking exactly of used cars when the ban on c-notes was first being discussed. It would be a major pain in the ass to cart around 5 times as many 20’s when purchasing previously-owned vehicles.

Richard Rawlings is not happy…

35 JonFraz February 29, 2016 at 1:23 pm

Um, why can’t they take certified checks or money orders? No danger of the check bouncing.

36 ZZZ February 29, 2016 at 2:37 pm

Fraudulent certified checks and money orders are the most common scam on Craigslist. I’d take a personal check before a certified check or money order.

37 Nathan W February 29, 2016 at 1:31 pm

Couldn’t possibly be related to tax evasion …

I would never pay cash for such a large transaction. I would rather a papertrail to prove the transaction in case of any issues.

38 ZZZ February 29, 2016 at 2:40 pm

It’s not tax evasion, cash is the only way to protect yourself from fraud. You’ve never actually bought a used car privately, have you?

39 Nathan W February 29, 2016 at 3:59 pm

A bank draft can be in your account in minutes. It would be altogether reasonable of the salesman to insist on waiting until the right numbers pop up on his screen until handing over the keys.

No, I haven’t bought a used car, but I would not pay cash for one. I don’t trust people who do cash only businesses, and I don’t do business with people I don’t trust.

40 Apeman February 29, 2016 at 4:05 pm

Nathan W,

If your are expressing a personal preference fine (although it says a lot about your economic background that you feel that way i.e. you have grown up incredibly privileged). But if you think that is a method that lower income people can adopt you are out of your mind. If I had adopted that mindset, I would not have been able to afford a half way decent car until I was in my mid to late twenties.

41 Thomas February 29, 2016 at 5:37 pm

Talking about salesmen now… Nate we are talking private party to private party.

42 Nathan W February 29, 2016 at 11:49 pm

I personally have a very strong preference for cash (honestly, it’s all about paranoia of some sort of future state that will monitor even trivial transactions), but don’t like to do business with people who insist on it. The only exception is airlines tickets, since cash is no longer an option. I’m not sure how my position is suggestive of any privileged background – perhaps some sort of cultural difference between where you live and anywhere I’m familiar with …

43 Apeman March 1, 2016 at 5:15 pm

Nathan W,

It is the fact that you have never bought a used car that marks you out as privileged. If you had bought used cars, I don’t think people would have to tell you what they are telling you.

44 Nedim February 29, 2016 at 10:34 am

Here, I fixed that for you.

“Virtually no one doing large legal transactions these days does them in cash IN THE US.”

The majority of $100 bills are outside of the USA. It is a phenomenal deal for us: we print some paper, export it and get real goods in return, never to see those bills back. If we invalidate those papers, they will flood back to us.

I can not emphasize enough the importance of those bills in developing economies. Every time a transaction happens, the trade is supported by the strength and good faith into the USA backing those bills. Remove that and it is consequential.

45 Nathan W February 29, 2016 at 1:40 pm

In the dozens of countries I’ve been to, the only time I’ve ever seen a $100 bill was in a bank in China, when I was trying to buy dollars to transfer digitally, and a friend of the manager approached me to sell cash so I could undercut the maximum daily exchange amount ($500 a day at the time).

I’m not doubting that the USD is an important means of exchange in many places. But for most transactions, why would having a $50 or $20 max matter? People doing legitimate transactions aren’t carrying around literally trucks full of cash, for the most part.

46 Nedim February 29, 2016 at 2:57 pm

Large denomination bills are the default long term value storage. They are not daily transaction tools. I presume that’s why you have not seen them. If I would need transaction money, I would “break” a 100 — US Dollar or Euro in some places.

I have observed land transactions in cash and vehicles sold/bought with $100’s. When emigrants go visit family, they bring large denomination bills. This is the reality for the working/middle class in large parts of the world where local banks and governments are not to be trusted.

47 Apeman February 29, 2016 at 12:10 pm

You must be a yuppie. At the very least you are a city slicker. In the country lots of large transactions are done via cash. Nobody is going to trust a check from a stranger to buy a tractor, load of logs, or any other larger interpersonal transaction that is routinely done out in the sticks. Nor are they using electronic transfer systems (I transfer money electronically all the time, but I am a minority in that regards. Most people around me don’t even know how to check their bank accounts electronically. America as a whole is not as advanced as you seem to think.)

48 JonFraz February 29, 2016 at 1:25 pm

Until recently filling up your gas tank could come to well over $50. Many people have weekly grocery tabs that come within striking distance of $100. 100$ is not a “large transaction: these days.

49 Nathan W February 29, 2016 at 1:42 pm

And … why don’t they want to use electronic payments? Are we still talking about 100% licit transactions here?

50 Apeman February 29, 2016 at 2:26 pm

Nathan W,

Rural areas skew older. Rural areas often have no broadband. (Where I live, I technically have it but it only barely qualifies for the broadband title legally speaking). Combined those two facts and often people have not ability/interest in learning how to use the computer and may not even have one. Heck, I still work with a number of people who don’t even have a smart phone. Another fact about rural areas is that there are a huge number of part-time small business. These business are legal (in the sense that they report income to the government) but they are run on a strictly pen and paper/cash system.

For example, I know of one feed store that I used to go to that only took cash, only issued hand written receipts, and collected the appropriate sales tax. Walking into that store was like walking into something from the fifties (and that is about the time the owner dated from as well). The further you go out into the boonies, the more likely you are to find things like that. And yes, you can and will wind up spending big money at a feed store if you are a farmer.

Another issue is the large number of hobby farms that legitimate never make profit and are only run because the people involved want to keep animals and defray the cost of doing so.

So basically there are 3 legit reasons why rural business tend to use cash. Poverty, age/resistance to technological change (Amish are moving into my area), and transaction cost for doing things in non-cash manner if you are small. If you have a small business refurbishing tractors out in your barn, you are not going to pay for a credit card system when you only do 3 or 4 big jobs in a year. And checks are major headache for any small business that deals with poor costumers.

51 Nathan W February 29, 2016 at 4:04 pm

Thank you for the perspective.

52 chuck martel February 29, 2016 at 5:38 pm

If the goal is a cashless society, don’t just eliminate C-notes, get rid of all of them, make the state economy completely pixel based. Then normal people can originate their own form of money and we’ll be able to begin the move away from the monster state.

53 Heorogar February 29, 2016 at 8:30 pm

At the risk of sounding paranoid, why are the government and its academic acolytes at war with cash? Could it be because “cash the currency of freedom?”

We need $500 bills. Today’s $100 bill buys in goods and services approximately the same as a 1969 $20 bill did.

Voltaire: “‘Paper money eventually returns to its intrinsic value – zero.”

See Glenn H. Reynolds in USA Today. ” Governments want to get rid of cash for two reasons. First, it gives them more control over citizens: They justify it in the name of fighting terrorists and organized crime, but what they really care about is making sure that nobody escapes their scrutiny, for purposes of taxes, regulation and political finagling. Second, if you’re stuck putting your money in a bank, they can force you to spend it (and thus “stimulate” the economy) by subjecting you to negative interest rates, in which money that just sits in the bank shrinks away, providing an incentive to spend.”

54 Ricardo February 29, 2016 at 5:21 am

The FX premium on $100 bills is real but it is a premium, not a spread, so it doesn’t function as a “transaction tax” at all. Currency dealers abroad are willing to pay a premium for a $100 because there are plenty of people willing to pay a premium — including their own depository bank — to take it off their hands. $100 bills are the money equivalent of the English language — they are more likely to be accepted and recognized around the world than anything else.

55 Horhe February 29, 2016 at 6:46 am

I think a useful take-away from Ashok Rao’s article is that people in “certain” countries think too much or allow themselves to be lectured too much about how what they want to do with their country will impact people in other places. The world would be better if there were less of that going on at every trivial level. Still, I disagree with the elimination of hundred dollar bills or 500 euro bills.

56 Ricardo February 29, 2016 at 7:00 am

One set of winners from banning $100 bills would be the banks and credit card companies that charge 3% or more for foreign transactions. In some countries, local banks are slapping on their own fees which can be $5 or more for withdrawals using foreign cards on top of whatever the customer’s own bank will charge. It is a bit ridiculous for this to be true in the year 2016 but many people can save money but bringing stacks of U.S. dollars on foreign trips and changing them the old fashioned way instead of relying on 1990s technology like ATM cards and credit cards. The spread and commission from changing money is almost always less than 3% but it will be much less convenient to travel with a stack of $20s than with $100s.

57 Nathan W February 29, 2016 at 8:18 am

I can’t imagine enjoying a holiday while walking around with thousands of dollars in my pocket or left in my hotel room. I’d much rather pay a couple percent premium for ATM fees (I pay 1.9% for foreign transactions, about as good or better than I expect at the exchange booth, plus time savings because foreign exchange operations take a ridiculous amount of paperwork in many countries), and have the peace of mind that comes with knowing that if you get mugged or your hotel room gets robbed that you can’t lost that much.

Consider that if the size of your stash becomes known, you become target number 1 for unscrupulous types. You might reason that you can just keep the size of your stash hidden. But, having dropped just 2 or 3 $100 bills, it becomes very easy to guess that the whole rest of your holiday is going to be paid like that, and that you must have some vast stack of cash either on your person or in your hotel room.

Also, many banks have premium accounts which offer free international transactions, and waive the monthly fee for maintaining a balance. TD Bank, for example, has such an account with a $30 monthly fee, waived for monthly balances above $5000. At an interest rate of virtually 0% and assuming that this is a reasonable buffer for short term emergencies anyways, it’s already paid for itself if you have just a couple international transactions a year. All you face in addition to that is the foreign exchange charge, and as I mentioned you’ll save lots of time in not having to exchange money and you probably won’t get much better of a rate at the exchange booth.

Finally, $100 bills are actually hard to exchange in a lot of places because local staff are not confident enough in spotting counterfeits for such large denominations, which can be equal to several month’s salary in many places in the world.

58 Thor March 1, 2016 at 1:54 pm

Sigh. Another multi paragraph post from Nathan. Let me summarize it: “I am a tourist abroad not a criminal.”

59 Kaptain Krunk March 12, 2016 at 7:17 pm

I routinely do this. Although I live not holiday in Thailand, I bring back thousands in cash 100s. This allows me to avoid wire fees and gives much better fx xch and the 100s being premium. Not only this but if my wife and I wish to travel in addl countries I have access to USD both to xch on arrival, as needed or in emergency.

From my backpacking days, many countries largest denominations are small in comparison, if you are traveling about you don’t want a moneybelt full small, dirty/torn, 3rd world currency.

There are now tons of fees associated with using cards to access your money abroad including a usually horrible rate.

Finally, while these countries will be forced to change, many foreign govts require payments in USD. Moreover, many economies run on usd. Cambodia gas had amazing success curtailing both inflation and corruption on a dollar economy.

In the end, it’s all about control. The mark of the best will not be etched on your hand, it’s most likely in your pocket right now and it’s a plastic ATM/debit/credit card.

60 cfh February 29, 2016 at 7:18 am

The C-note is the Federal Reserve’s most popular and successful product. Something must be done about this.

61 rayward February 29, 2016 at 7:28 am

Is this more about the dollar serving as a storage of value than HDNs facilitating crime? Storage of value is one function of money, but maybe Summers’ concern is that the dollar serves that function too well (at the expense of the other two main functions of money). Is hoarding of money (dollars) causing a declining velocity of money, and acting as a drag on the economy? In an era of zero and negative interest rates, why not keep HDNs in a big box buried in the back yard (or in a safe deposit box at the bank).

62 Heorogar February 29, 2016 at 7:40 am

The elites confiscated we the people’s monetary gold in 1933. Now they want to take out $100 from currency in circulation. What’s the true motive? Is it to curtail drug traffickers in Argentina or we the people? I’m not a criminal. Go after criminals, not people.

Plus, given the $19 trillion national debt and trillions in unfunded transfer payments, the huge debtor, US gov, needs inflation. Will inflation be run through created reserves, bank checking accounts and debit cards, without large bills? I mean when a loaf of bread costs $200 . . .

63 rich February 29, 2016 at 7:41 am

Nathan W says:
“Virtually no one doing large legal transactions these days does them in cash.”

Not true. In California and Colorado, the state legalized pot business is booming. However, due to banking restrictions, this high volume pot business is a cash business. Without $100 bills, dealers will need fleets of armored wheelbarrows.

64 Nathan W February 29, 2016 at 8:30 am

Good point. But it is precisely for the fact that the level of government that makes decisions about banking, finance and monetary regulations, etc., still technically considers this to be illicit activity. Where anyone got the notion that it is the business of government to regulate or criminalize the decision to put natural products in my body is beyond me, but this does not change the fact that the original statement is generally upheld.

65 stalin February 29, 2016 at 3:02 pm

It’s in the bleenth amendment to the Constitution.
(Bleen for the uninitiated is the number between 7 and 8).
Bleenth amendment to the Constitution:
The government will do whatever it wants.

66 Doug March 1, 2016 at 5:09 pm

I’m all for keeping the $100 bill, and I can think of tons of legitimate, legal uses for such bills, but medical marijuana is not one of them. Selling marijuana is still a federal crime.

67 Rock Lobster February 29, 2016 at 8:10 am

If the name of the game is cracking down on crime, wouldn’t we want the criminals using USD over EUR or CHF? The U.S. government has made it clear that anybody in the world who commits a crime that even remotely touches the U.S. banking system is fair game for them to go after. The FIFA scandal comes to mind as an example. I’m not saying I approve of the government taking on that role, but if they’re going to do it, it’s easier if the criminals are transacting in USD rather than $1000 CHF bills.

68 Nathan W February 29, 2016 at 8:43 am

Transactions in cash do not touch the banking system.

69 Heorogar February 29, 2016 at 9:10 am

“Transactions in cash do not touch the banking system” until holders of large sums of currency make purchases with legitimate businesses. Assume that Tom Collins brings a suitcase with $100,000 to the Ford dealer to buy a new tricked-out, crew cab pick-up truck. The auto dealer’s finance person will ask for information (name, address, SSN, source, etc.) from Mr. Collins to fill out a US “Currency Transaction Report” (CTR) which is required for all cash transactions $10,000 and over. When the auto dealer deposits the cash at its bank, the bank will need to either obtain a CTR or see the original CTR.

The regs allow for banks to keep lists of cash businesses which they have vetted that do not need CTR’s for most large currency transactions.

The bad guys constantly attempt to beat reporting requirements by “structuring” cash transactions: making numerous below $10,000 transactions into and out of numerous surreptitious accounts. The bank regulators are smart to this and banks are required to have systems to detect structuring.

The bad guys also try to “turn” bank employees to aid and abet as co-conspirators in money laundering crimes.

70 Nathan W February 29, 2016 at 1:49 pm

I was recently translating a large number of consulting reports (via middlemen via middlemen via middlemen …) for one of the largest banks in the world, and their efforts to comply with anti-money laundering and anti-terrorist financing regulations. Large number of below-threshold cash transactions are now also flagged, or at least they should be. If they cannot prove credible efforts in this regard, they may have difficulty maintaining access to the US market.

71 Rock Lobster February 29, 2016 at 9:21 am

For the sake of brevity I didn’t want to belabor the point, but if you’re using USD cash you’re still touching the tip of the U.S. financial system. Dollars are liabilities of the Fed, they make their way to the public via the banking system, and for many criminal enterprises they later have to be laundered back into that system somehow.

The bottom line is that it’s easier for the U.S. to go after people for money laundering and the like if they’re using USD, and the U.S. has a broader reach here. Switzerland needed our help as partners in going after FIFA, even though the case was largely about crimes that took place outside the U.S.

72 Nathan W February 29, 2016 at 1:53 pm

The regulations apply to USD values of cash transactions, and are not related to the actual choice of currency.

And since nearly every bank on the planet accepts USD (North Korea may be an exception), there is no reason to believe that US financial institutions will be in any better position to be involved in flagging suspect transactions for the fact that the laundering made use of USD at some stage. The influence of the US financial system lies in its ability to ban any financial institution from the US market if they fail to demonstrate credible efforts towards anti-laundering, not the fact of cash transactions being in USD.

73 Ray Lopez February 29, 2016 at 10:05 am

@Rock Lobster – you don’t need to touch the US banking system for the Feds to go after you. For drugs, they have a doctrine, used in South American (see Netflix “Narcos” series, very accurate) that anybody who exports illegal drugs in any foreign country where the drugs end up in the USA may be extradited to the USA. And there’s even a Sup. Ct. case, decided by Rehnquist, that said the DEA can kidnap a Mexican citizen and bring him to the USA for trial,and it’s legal (like the Israelis did with Nazi war criminals).

74 rich February 29, 2016 at 9:42 am

If they did away with cash, completely, bank robberies, home invasions and pick pocketing would be seriously less lucrative.

75 ZZZ February 29, 2016 at 10:11 am

Pick pocketing and home invasions wouldn’t change. Cash is probably the least valuable thing in your house or pocket.

76 JonFraz February 29, 2016 at 1:27 pm

We’re already there. One theory behind the fall on crime rates is that it’s no longer profitable to rob people or even small stores, because the chance that they will have large amounts of cash for the heist is fairly small.

77 stalin February 29, 2016 at 3:11 pm

Yeah, that’s why Mike Brown the 240# 6ft 4in unarmed teenager took the $50 box cigarillos from that Ferguson convenience store and left the cash.

78 anon February 29, 2016 at 9:58 am

Bring back the $1000.

Inflation adjusted a $100 is only a $20 anyway.

79 tokarev February 29, 2016 at 10:01 am

There’s a big push to do away with cash completely so people can’t hide earnings from the government and negative interest rate policies can be more effectively implemented.

80 Ray Lopez February 29, 2016 at 10:09 am

+1. I have a thread on this at the Gold Forum in Kitco under my name. I might end up linking this post by TC to it, but Askok’s post is just duplicate news I’ve already linked. Several countries, from Scandinavia and South Korea for example, as well as the USA, are looking into abolishing cash so they can (1) promote negative interest rates, and (2) “cut down on crime”. Of course, as ZeroHedge said, the government will claim (2) is the ‘real reason’ but in fact it’s (1).

81 Trust Fund Baby / Slacker February 29, 2016 at 10:41 am

Keep up the good work, Ray! You’re fighting for all of us.

82 derek February 29, 2016 at 10:57 am

So the problem is government can’t control something. That is the only problem. So let’s make it so that government can control more.

Let’s give Trump the ability to know and seize any money you have anywhere any time.

It takes and exquisite education to be that stupid.

83 paste February 29, 2016 at 11:58 am

+1 Good point. Banning C-notes is just a symptom of a much larger problem which is the government anti-money laundering industry. Dan Mitchell’s argument is persuasive ( ) . We really should be focusing on reining in out of control government control:

“As Americans, we should have a presumption of innocence in our daily lives. What business is it of government whether we want to carry $20 bills or $100 bills? And think about the implications of these laws. What if the government said we need to ban cars, or put government-monitored homing devices in all vehicles, because bank robbers occasionally use automobiles as getaway vehicles? In this case, there is a theoretical benefit to the policy, just like there is a somewhat plausible case for anti-money laundering laws, but presumably we would reject such a policy as too intrusive.

Anti-money laundering laws are a classic case of bad policy leading to more bad policy. The government passes drug laws that create huge profits for criminals. But rather than getting rid of victimless crimes, the government imposes policies that make life more difficult and costly for everyone else.”

84 GMC February 29, 2016 at 11:30 am

It is not the case that the world would be a better place if crime were impossible.

85 Nathan W February 29, 2016 at 2:00 pm

+ infinity. That would be hell, and could only be equivalent to the most draconian and all-pervasive spy state imaginable.

86 albatross February 29, 2016 at 12:47 pm

I have this half-baked theory that improved surveillance (partly thanks to the war on terror, but mostly driven by technology favoring it) is increasing the power of the people doing the surveillance (police and intelligence agencies) in society. The result is that this kind of proposal, something the police and spies have probably wished for for a long time, is more likely to be adopted despite any resistance normal citizens might put up. Over time, I expect to see the US become increasingly friendly to the sorts of things that make life easier for the NSA and FBI, because they’re increasingly able to know the dirt on powerful decisionmakers, and those decisonmakers know it. (This can work even if both agencies are scrupulous about not spying on anyone they shouldn’t be spying on–the guilty flee where no one pursueth and all that.)

87 chuck martel March 1, 2016 at 6:03 am

Why would the opinion of Larry Summers on a matter like this be any more significant than that of, for instance, Pee Wee Herman?

88 Donaldson March 3, 2016 at 10:08 am

Maybe Lycurgus was right about using heavy iron bars as currency after all.

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