The potential consequences of the withdrawal of the $100 bill from circulation have been the subject of debate among numerous prominent economists and policymakers in recent years.
It may come as a surprise, but a significant number of the $100 bills in existence are not even in circulation within the United States; they are stored abroad.
The following is a comprehensive examination of the reasons why certain individuals are advocating for the abolition of the $100 bill, as well as the potential implications for the economy, businesses, and consumers.
The $100 Bill’s Global Presence
One of the most extensively circulated banknotes worldwide is the $100 bill. In reality, it is approximated that approximately two-thirds of all $100 bills are stored outside of the United States.
Despite its limited use in daily domestic transactions, the $100 note comprises nearly 78% of the cash in circulation, as per the Federal Reserve.
The $100 bill is typically reserved for larger, less frequent transactions or international use, while the majority of individuals opt for smaller denominations, such as $20 or $50 bills, for their regular purchases.
What is the Purpose of Removing the $100 Bill?
There have been numerous arguments in favor of the abolition of the $100 bill from circulation. The most significant reason is to mitigate illicit activities such as terrorism financing, tax evasion, and money laundering. Large-denomination banknotes facilitate the concealment of illicit activities. Countries such as the European Union and Canada have already eliminated large denomination currencies (e.g., the 500 euro note) due to comparable concerns.
Kenneth Rogoff, a Harvard professor, and other economists contend that the removal of high-value notes could also attract additional financial activity to the formal banking system, where it can be taxed and regulated. In his book The Curse of Cash, Rogoff posits that the elimination of large bills, such as the $100 note, could mitigate the clandestine economy and tax evasion.
Counterarguments: Consumer Inconvenience or Cashless Society?
Although the prospective advantages are evident, there are legitimate objections to the elimination of the $100 bill. For example, critics contend that the elimination of large bills could have a detrimental impact on individuals who prefer or depend on currency for their transactions.
This could have a disproportionate impact on low-income and elderly populations, who may not have simple access to digital payment systems. Furthermore, in countries with restricted access to banking services, currency continues to be the primary method of transaction.
There is also a doubt as to whether the removal of large bills would effectively reduce illegal activities. Criminals may simply transition to using lesser denominations or alternative forms of currency, such as cryptocurrencies.
Economic Consequences
The elimination of the $100 bill would have a significant impact on the economy, particularly in the realm of monetary policy. For instance, the Treasury Department may incur increased printing and maintenance expenses if the demand for smaller denominations is stimulated by the elimination of high-denomination notes. Furthermore, the $100 bill is frequently utilized as a store of value, particularly in foreign countries with unstable currencies. The financial systems of these regions may be disrupted by its removal.
Inflation is another concern. Some contend that the Federal Reserve could exert greater control over inflationary pressures by restricting the availability of substantial quantities of physical currency. Nevertheless, some individuals regard this as an improbable result, as a result of the significant function that digital money and other financial instruments play in contemporary economies.
Proposals and Recent Developments
There are currently no official plans to eliminate the $100 bill from circulation in the United States as of 2024; however, discussions are ongoing. The $100 note was enhanced with new security features by the Treasury Department in 2020, which rendered it more difficult to counterfeit. This implies that the government may continue to regard the $100 bill as a valuable component of the economy, despite its acknowledgment of concerns regarding its use in illicit activities.
This issue is likely to remain pertinent, particularly in light of the global shift toward cashless transactions, which has been particularly prevalent in the aftermath of the COVID-19 pandemic. Sweden and Denmark are among the nations that are currently transitioning to cashless societies, and it is possible that other nations will follow suit in the years ahead.
The ongoing discussion regarding the future of currency, financial security, and the prevention of illicit activities is underscored by the controversy surrounding the removal of the $100 bill from circulation. However, the elimination of the $100 bill could potentially have a negative impact on populations that depend on cash transactions, as well as enhance tax collection and reduce crime. The role of corporeal currency may continue to diminish as a result of technological advancements and the proliferation of digital payments; however, the $100 bill remains a critical component of the global economy at present.