David Sundman shared this article from the Washington Post by former Treasury Secretary Larry Summers chiming in on the calls to
eliminate high-denomination banknotes. Thanks. -Editor
Harvard's Mossavar Rahmani Center for Business and Government, which I am privileged to direct, has just issued an important paper by
senior fellow Peter Sands and a group of student collaborators. The paper makes a compelling case for stopping the issuance of high denomination
notes like the 500 euro note and $100 bill or even withdrawing them from circulation.
I remember that when the euro was being designed in the late 1990s, I argued with my European G7 colleagues that skirmishing over
seigniorage by issuing a 500 euro note was highly irresponsible and mostly would be a boon to corruption and crime. Since the crime and
corruption in significant part would happen outside European borders, I suggested that, to paraphrase John Connally, it was their currency,
but would be everyone’s problem. And I made clear that in the context of an international agreement, the U.S. would consider policy
regarding the $100 bill. But because the Germans were committed to having a high denomination note, the issue was never seriously debated
in international forums.
The fact that — as Sands points out — in certain circles the 500 euro note is known as the “Bin Laden” confirms the arguments against
it. Sands’ extensive analysis is totally convincing on the linkage between high denomination notes and crime. He is surely right that
illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds as
would be the case if the $20 bill was the high denomination note. And he is equally correct in arguing that technology is obviating
whatever need there may ever have been for high denomination notes in legal commerce.
What should happen next? I’d guess the idea of removing existing notes is a step too far. But a moratorium on printing new high
denomination notes would make the world a better place.
To read the complete article, see:
It’s time to kill the $100 bill
(/www.washingtonpost.com/news/wonk/wp/2016/02/16/its-time-to-kill-the-100-bill/)
Wayne Homren, Editor
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