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Title: There's been a mysterious surge in $100 bills in circulation, possibly linked to global corruption
Source: CNBC
URL Source: https://www.cnbc.com/2019/02/27/the ... nked-to-global-corruption.html
Published: Feb 28, 2019
Author: Kate Rooney
Post Date: 2019-02-28 12:58:30 by Hondo68
Keywords: None
Views: 1551
Comments: 14

  • The number of hundred-dollar bills in circulation has skyrocketed in the past decade.
  • It could be a troubling indicator for global corruption as high-denomination bills remain a go-to for criminals, given the anonymity and lack of transaction record.
  • “There's certainly enough evidence to say it is an enabler of corruption, but it is also a way for people to keep assets outside of the financial system," says Nicholas Colas, co-founder of DataTrek research.

The number of outstanding U.S. $100 bills has doubled since the financial crisis, with more than 12 billion of them across the world, according to the latest data from the Federal Reserve. C-notes have passed $1 bills in circulation, Deutsche Bank chief international economist Torsten Slok said in a note to clients this week.

Generally, economists believe the surge is related to people around the world wanting to hoard cash, a similar force that's driven the interest in cryptocurrencies. High denomination, high value currency notes have historically been a preferred form of payment for criminals, given the anonymity, lack of transaction record and relative ease with which they can be brought across borders.

Nicholas Colas, co-founder of DataTrek Research, has been down the "rabbit hole of a topic" for more than a decade. He said the growth in $100 bills in circulation is a signal the world is relying on them as a store of value — and still using them for international crime.

"It has nothing to do with the U.S. economy and nothing to do with interest rates," said Colas. "There's certainly enough evidence to say it is an enabler of corruption, but it is also a way for people to keep assets outside of the financial system albeit in a kind of bulky way."

The number of hundred dollar bills abroad began surging after the Gulf War and U.S. invasion of Afghanistan, according to Colas. Part of stabilizing the region meant replacing local currencies with something, and "that something was the U.S. dollar."

Those larger bills also have a longer shelf life than any other form of U.S. cash. Still, Deutsche Bank's Slok said multiple factors could explain the increase in C-notes.

"It could be driven by a global fear of negative interest rates in Europe and Japan, or it could be a savings vehicle for U.S. households worried about another financial crisis, or it could be driven by more demand from the global underground economy," Slok said.

80% overseas

A 2018 research paper from the Federal Reserve Bank of Chicago estimates that 60 percent of all U.S. bills and almost 80 percent of all $100 bills are now overseas. That's up from 15 to 30 percent around 1980, according to research from Federal Reserve Board economist Ruth Judson. She found that economic and political instability contribute to this demand.

Projecting future demand for U.S. currency is "challenging" and depends on how quickly the economy grows, interest rates, new payments technologies, and on whether people in other countries continue to see U.S. dollar bills as a useful asset — "all factors that are, to say the least, uncertain," according to the Chicago Fed.

A surge in digital payments may be contributing to the lessening demand for lower denomination bills. Rising smartphone use, a shift toward online shopping and improvements in network bandwidths pushed global digital commerce volume above the $3 trillion mark in 2017, according to a recent McKinsey report. That is on track to more than double by 2022, according to McKinsey.

There has been pressure to get rid of high denomination notes to curb international crime. Lawrence Summers, former Treasury secretary and director of the National Economic Council in the White House, has argued for abolishing $100 bills. Summers wrote an op-ed in The Washington Post in 2016 titled, "It's time to kill the $100 bill."

"A moratorium on printing new high denomination notes would make the world a better place," Summers said, citing its potential for crime. "Here is a step that will represent a global contribution with only the tiniest impact on legitimate commerce or on government budgets. It may not be a free lunch, but it is a very cheap lunch."

He referenced a Harvard research paper written by former Standard Chartered bank chief executive Peter Sands, who argued to eliminate high denomination, high value currency notes.

"By eliminating high denomination, high value notes we would make life harder for those pursuing tax evasion, financial crime, terrorist finance and corruption," Sands wrote.

The global illicit money flows were "staggering" and fuel crimes from drug trafficking and human smuggling to theft and fraud, Sands said. He estimated that depending on the country, tax evasion robs the public sector of anywhere between 6 percent and 70 percent of what authorities estimate they should be collecting. And despite "huge investments in transaction surveillance systems, and intelligence, less than 1 percent of illicit financial flows are seized.

Soon after that paper was published in 2016, the European Central Bank announced it would stop producing the 500 euro note, citing concerns it could facilitate illegal activities. Despite similar pressure on the Fed, Colas isn't optimistic it will take the same steps as long as cash distribution is still profitable.

"The Federal Reserve and Treasury make 99 dollars for every $100 dollar bill they print and sell offshore," Colas said. "There's a natural desire to keep printing these things — the U.S. government makes a lot of money selling them."


Poster Comment:

Probably due to sanctions. Fedgov can cut off digital transactions, but $100 FRN's are good to go.

Dear Leader, Kim Jong Un stuffs his mattress with them. (2 images)

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Begin Trace Mode for Comment # 10.

#1. To: hondo68 (#0)

The number of hundred-dollar bills in circulation has skyrocketed in the past decade.

Probably everything cost more so little bills just will not cover cost of buying stuff you want.

Same issue with the penny. For the average joe its a waste of coin.

Justified  posted on  2019-02-28   15:09:13 ET  Reply   Untrace   Trace   Private Reply  


#2. To: All (#1)

I bought a coke the other week and it cost damn near $2 for something that I paid less than a $1 a few years ago. Things just cost more thanks to crony crapitalist ie socialist demoncrats.

Justified  posted on  2019-02-28   15:14:15 ET  Reply   Untrace   Trace   Private Reply  


#3. To: Justified, D 'n R crooks, End the FED, *The Two Parties ARE the Same* (#2) (Edited)

Used to get a bottle of Coke for a nickel from the vending machine. Long time ago. Dimes were REAL Silver.

End the FED! Ruined the value of the dollar. The difference between what you paid for a Coke and 5 cents, is only a portion of how much your taxes have been raised,

The biggest tax hike is inflation.

Hondo68  posted on  2019-02-28   15:25:40 ET  Reply   Untrace   Trace   Private Reply  


#5. To: hondo68 (#3)

Long time ago. Dimes were REAL Silver.

Weren't those mercury dimes from '64 or '65 the last of them? I seem to recall that.

People still keep an eye out for those old dimes.

Tooconservative  posted on  2019-02-28   17:47:44 ET  Reply   Untrace   Trace   Private Reply  


#9. To: Tooconservative (#5)

mercury dimes from '64 or '65 the last of them? I seem to recall that.

Yes, LBJ dimes. Tricky Dicky killed off PM based currency in '71.

That got Ron Paul PO'd and into sound money and politics.

Hondo68  posted on  2019-02-28   18:05:20 ET  Reply   Untrace   Trace   Private Reply  


#10. To: hondo68, Tooconservative (#9)

Now wasn't it the LBJ and demoncrats that over spent for the welfare state and a prolonged war that caused France to demand gold instead of USD that forced US off the precious metal? I could not have been more than 8 or so back then.

To me it always seems the repugnants are forced to clean up the demoncrats mess and get all the blame because they kept US from collapsing? Then again what do I know?

Tooconservative its nice to see you back here.

Justified  posted on  2019-02-28   18:59:28 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 10.

#11. To: Justified, Chairman Mao, Tricky Dicky, Republicans (#10) (Edited)

Tricky Dicky at Chairman Mao's Silver & Gold Exchange.

I remember when those cheep Nixon GOP coins first came out where you could see copper on the edge.

Disgraceful!

Fake. Poor Ike, stabbed in the back by his former VP. I have a '71 version of that Eisenhower Dollar, it's FAKE too.

I believe that LBJ started minting fake coins in the 60's. All in the D&R family.

Hondo68  posted on  2019-02-28 19:26:00 ET  (2 images) Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 10.

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