Has the C-note seen its zenith?

South Florida Sun-Sentinel (Sunday) - - Money - By Tay­lor Telford and Jeanne Whalen

A puz­zling surge in the num­ber of $100 bills in cir­cu­la­tion and the planned demise of the 500 euro bank note have res­ur­rected de­bate on the need for three-digit cur­rency at all — given their fa­vor with crim­i­nals around the globe.

A decade ago, the num­ber of $100 bills lagged well be­hind $1 and $20 notes. But the tally has dou­bled since the end of the fi­nan­cial cri­sis, ac­cord­ing to data from the Fed­eral Re­serve; by 2017 the C-note had eclipsed the dol­lar bill to be­come the most widely dis­trib­uted U.S. cur­rency. Out­put is still climb­ing, and ex­perts are per­plexed.

“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,” Torsten Slok, chief in­ter­na­tional econ­o­mist of Deutsche Bank, wrote in a note to in­vestors last week.

The Ben­jamin Franklin­faced cur­rency has been the largest U.S. bill since the $500, $1,000 and $5,000 were axed in 1969, but it’s not very pop­u­lar for day-to­day trans­ac­tions. The av­er­age Amer­i­can car­ries about

$60 in cash, ac­cord­ing to a

2017 study from the Fed­eral Re­serve Bank of At­lanta. A De­cem­ber study from Pew Re­search Cen­ter found that about 30 per­cent of Amer­i­cans use no cash at all on a weekly ba­sis, sug­gest­ing that, in the dig­i­tal age, cash is go­ing out of style al­to­gether.

The U.S. Trea­sury De­part­ment is re­spon­si­ble for print­ing cur­rency, and does so to re­place bills that are old or dam­aged, or to meet in­creased de­mand. But the life­span of $100 bills is about 15 years, com­pared with 8.5 years for a $50 bill, so they don’t need to be re­placed very of­ten.

The vast ma­jor­ity of th­ese bills aren’t even here. A 2018 re­search pa­per from the Fed­eral Re­serve Bank of Chicago es­ti­mates as much as 80 per­cent of the

12 bil­lion $100 bills in cir­cu­la­tion live out­side the coun­try. Some of this growth is likely a re­sult of the U.S. dol­lar sup­plant­ing lo­cal cur­ren­cies in un­sta­ble eco­nomic en­vi­ron­ments.

“We think that the sig­nif­i­cance of for­eign de­mand is unique to the dol­lar,” Ruth Jud­son, an econ­o­mist at the Fed Board of Gover­nors, said in a 2018 pa­per from the Fed­eral Re­serve Bank of Rich­mond.

One pos­si­bil­ity is an in­crease in global cor­rup­tion and crim­i­nal ac­tiv­ity. A 2016 pa­per pub­lished by Har­vard’s Mos­savar-Rah­mani Cen­ter for Busi­ness and Gov­ern­ment claimed that high de­nom­i­na­tion notes are the “pre­ferred pay­ment mech­a­nism” of crim­i­nals, be­cause of “the anonymity and lack of trans­ac­tion record they of­fer, and the rel­a­tive ease with which they can be trans­ported and moved.”

The Har­vard pa­per, by Peter Sands, for­mer chief ex­ec­u­tive of Stan­dard Char­tered Bank, puts the con­ve­nience of big bills for crim­i­nals in stark terms: $1 mil­lion in $20 bills would weigh more than 50 pounds. In 500 euros bank notes, it would come in at a lit­tle over 2 pounds.

Though ex­act fig­ures aren’t avail­able, the amount of cash crim­i­nals laun­der each year could range from hun­dreds of bil­lions of dol­lars to $1 tril­lion, the Fi­nan­cial Ac­tion Task Force, an in­ter­gov­ern­men­tal body that com­bats il­licit fi­nance, said in a 2015 re­port. The U.S. dol­lar, the euro, the British pound and the Swiss franc are among crim­i­nals’ pre­ferred cur­ren­cies.

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