Has the C-note seen its zenith?
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.