Harvard economists want to nix the $100 bill
Because criminals are all about the Benjamins
The Harvard Kennedy School has just published a paper that advocates for dropping high-denomination currency like the $100 bill and €500 note. The reason? Big notes are the preferred method of payment in organized crime, like drug trafficking and terrorism funding.
Regular folks can get by just fine with $50 bills, but crooks would need to bring twice as many cash-filled briefcases to each shady rendezvous. Getting rid of big bills would increase their risk of detection and “disrupt their business models,” the paper argues.
Makes sense, but how would it work? The government can’t just go around snatching bills out of people’s wallets. If the US were to void all $100 bills immediately, reimbursement would be a nightmare. If the government didn’t void them but instead simply expected people to show up at banks and fork them over in exchange for smaller notes, it would run into the gun control problem, i.e. if you criminalize Benjamins, only criminals will have Benjamins.
There’s a precedent for this, and it’s not very encouraging. High-denomination currency has been issued in the U.S. since the late 18th century — we’re talking really high, like $1,000, $5,000 and even $10,000 bills.
Amazingly, these bills are still legal tender. In 1964 the Federal Reserve took them out of circulation and instituted a policy of “passive retirement,” which basically means that the notes still work, but if you bring them to a bank the bank will credit you the stated value and then destroy the bill.
Only about three hundred $10,000 bills are known to exist nowadays, so it’s no big deal to retire the bills whenever they show up. Plus, most of these bills are owned by collectors, who paid multiple times face value for them, so they aren’t really in circulation.
But there are billions of $100 bills floating around out there. Passive retirement wouldn’t even make a dent in this number, and criminals would still go on using them to fund illicit activity just like before.
So, sure, it’s an interesting idea — but it seems unlikely to happen anytime soon. Until then:
