The Popularity of $100 Banknotes
On the other hand, the campaign against $100 banknotes can be much less justified by criminality. This denomination is the world’s most popular banknote, with almost as many in circulation as the iconic one-dollar bill. (According to the FED’s 2015 data, there are 10.8 billion $100 bills in circulation in the world, compared to 11.4 billion one-dollar bills. At the same time, only 8.6 billion of the $20 bills are in circulation. In 1994, however, it was 80 percent less, 2, 3 billion $100 coins were in circulation.) The United States last limited the value of denominations in circulation in 1969. Then the 500 and 1,000 dollar bills were included, as well as the even larger denominations, the 5,000 and 10,000 dollar bills, which existed almost only symbolically. (There was even a $100,000 denomination for some interbank transactions, but this was not put into external circulation.) These extreme denominations were issued when the gold standard was abolished in 1933, but later they were no longer printed, so by 1969 there were only very few of them in circulation.
Inflation’s Impact on Currency Values
The value of the 100-dollar bill is about HUF 28,000, so if it were to be discontinued, a strange situation would arise where the value of the largest forint banknote would be higher than the next-in-line 50-dollar bill. Moreover, $100 today is only a fraction of what $100 was worth in 1969. (Due to inflation, today’s 100 dollars is equivalent to only 14.7 dollars, so we can also say that since 1969, both the 50 and 20-dollar bills have ceased to exist.) Therefore, due to inflation, larger denominations should be reissued, but the opposite is true. is happening. Since $100 is a completely ordinary value, neither the reserve function nor the underworld use can be a decisive factor in justifying the withdrawal. (By the way, Summers would implement the withdrawal by destroying the banknotes returned to the FED and not issuing new ones instead.)
According to experts, the sudden withdrawal and mandatory submission could shake confidence in the smaller denominations remaining in circulation and the entire financial system.
The main argument against the $100 bills lies elsewhere, in the possibility of cash payment itself. Such transactions cannot be tracked or taxed, which causes a tax loss of between 300-500 billion dollars from the state’s point of view. (According to the latest estimate of the US tax office in 2006, 385 billion is untaxed cash flow, while an expert estimate made last year states that Americans do not pay any taxes on 18-19 percent of their income, which means a loss of 500 billion dollars.)
Impacts of Cash on Financial Policy
In terms of magnitude, the estimated amount of the tax loss reaches the annual budget deficit, so according to the argument, the deficit could be eliminated if an electronic trace of every transaction remained and thus could be taxed. State (or, in the case of the euro, EU) financial policy is also limited by cash. More and more people are arguing that savings (not only cash rolled up in chewing gum, but also fixed bank deposits) are holding back the economy, so it would be necessary to introduce negative interest rates. Negative interest rates act as a kind of tax and penalize saving, thus encouraging the spending of money as soon as possible, i.e. consumption.
Growing consumption means growing tax revenue and a booming economy, the argument goes. In the event of an economic or financial crisis, bank-saving special taxes on digital money can be easily imposed, or access can be restricted (as happened, for example, in the case of Cyprus).
Cash also means a loss of income for banks: after paying in cash, they cannot charge any commissions or costs (which, in addition to discretion, is the other big attraction for citizens), and unlike deposits, banks cannot lend out cash.
Towards Cashless Societies
However, limiting banknote denominations is only an intermediate goal on the way to a completely cashless society. In this regard, smaller countries, primarily in Northern Europe, are already much ahead of Germany or the United States, which traditionally stick to cash (in the latter countries, 80-85 percent of all commercial transactions are still carried out in cash – in terms of number, not value). In Sweden, on the other hand, the proportion of cash purchases is already below 3 percent, and Denmark will, in principle, completely switch to electronic payment within a year or two, even for the smallest purchases. In the case of the latter transactions, the breakthrough is not bank cards, but payment applications installed on smartphones. The largest Norwegian bank also urged the banning of cash (!) in January.
Cash Elimination Trends
The countries that have switched to the common currency cannot individually choose to be left out of the cash restriction measures (for example, Slovakia cannot print 500 euros instead of the withdrawn banknotes), which increases the room for maneuver of the countries that keep the national currency. At the same time, this can only mean a temporary respite, because the global trend is moving towards the elimination of cash. International financial organizations, EU financial leaders, and major banks have committed themselves to this, and those who argue against it – who see a severe restriction of personal freedoms in this trend – are at best old-fashioned figures, at worst allies of the underworld.
