not the actual bills stolen

$100 bills, seignorage, and theft

An IM conversation

John Carney: Did you see this Swiss air theft story?

Felix Salmon: cool

John Carney: What I don’t get is why you would ship dollars from Zurich to JFK bound for the Fed.

Felix Salmon: Presumably it was a Swiss bank
they get deposits of dollars in Switzerland
ultimately those dollars need to make it back to the USA

John Carney: Shouldn’t they just like deposit them with the SNB?

Felix Salmon: SNB will only accept SwFr

John Carney: Or, more simply, destroy them and have the Fed credit their account?
Shipping seems like a lot of work

Felix Salmon: That’s the problem with cash
it’s physical
you can’t deposit it by taking a photo of it with your iPhone

John Carney: The ECB has dollar swap lines

Felix Salmon: as does the SNB

John Carney: So presumably it needs some dollars

Felix Salmon: not dollar BILLS

John Carney: It all feels very gold standardy

Felix Salmon: it’s a natural cost of seignorage

John Carney: The SNB should just be authorized to count and destroy the money.

Felix Salmon: how would that benefit the NY Fed?

John Carney: Well, it would reduce transaction costs of dollar denomination abroad.
Since shipping is expensive.

Felix Salmon: Given the degree to which $100 bills in Switzerland are likely to have been used for illicit purposes, I’m not convinced the Fed really wants to make their use any easier

John Carney: Sure. And I suppose it might have undesirable effects of increasing demand for dollars
therefore would be a policy tightening

Felix Salmon: That’s marginal, cash is a negligible portion of the USD money supply

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