Larry Summers argues that large-denomination banknotes only make it easier for criminals and terrorists to move money around
Former U.S. treasury secretary Larry Summers wants to kill the U.S. $100 bill and other large banknotes, in a bid to make life tougher for underworld figures (and/or, incidentally, anyone who enjoys making it rain à la Fat Joe).
Summers, a key Clinton administration player and ex-Harvard University president – who evidently goes by “Lawrence H.” when writing – used his Washington Post column to highlight a report by Peter Sands of Harvard’s Mossavar Rahmani Center for Business and Government. Sands argues for the discontinuation (and perhaps even withdrawal from circulation) of such high-value denominations as the U.S. $100 bill as well as the £50 sterling note – not to mention the €500 note, which is worth six times as much as a Benjamin. Summers even implies that the U.S. Federal Reserve should think twice about keeping the fifty.
Why? Because gangsters and terrorists are key beneficiaries of large denominations. Cash is easy to conceal and difficult to trace. Summers writes: “The fact that … in certain circles the 500 euro note is known as the ‘Bin Laden’ confirms the arguments against it.”
A million U.S. dollars, Summers observes, weighs around two pounds if you get it all in big, purple €500 notes. In $20 bills, he says you’re looking at about 50 pounds, or 23 kilograms. (We found a wide range of estimates online, between 40 and 110 pounds. Our request to the higher-ups for a million dollars in cash and a scale to weigh it with was denied. They didn’t even say yes to the scale.)
Whatever a million bucks weighs, the scales of history are trending in Summers’s favour: Over time, as technology has usurped the place of cash in large transactions, large-denomination bills have gradually vanished. The United States once had bills worth as much as $5,000, $10,000 and even $100,000. (Homer Simpson was somewhat wrong about what was on the back of the $10,000: Jimmy Carter was not passed out on the couch.)
These mega-notes were primarily intended for interbank transactions (obviously an obsolete function by now), but when the Nixon administration determined they were also a favourite of organized crime, Tricky Dick had them nixed. (Ironically, and speaking of organized crime, the Watergate burglars were caught with large-denomination notes on their person for some reason.)
The Canadian $1,000 bill, likewise, was pulled in 2002 out of concern for its appeal to organized criminals (who nicknamed them “pinkies”).
A so-called pinkie from the 1950s
So that’s how it came to be that the game of Monopoly, popularized in the 1930s, uses a higher maximum denomination ($500) than the real-life United States in the 21st century – and if Summers gets his way and hundreds disappear, the discrepancy will be greater still.
While eliminating large bills will make buying a guitar off some guy on Kijiji slightly more cumbersome, arguments can be made that we don’t really need them. Death to the $100 and $50 wouldn’t be such a huge deal in North America, where cash machines spit out twenties by default. It’s already a region where low denominations dominate.
Wallets could end up fattening in other parts of the world, however: In Australia, for example, it’s the $50 that usually comes out of ATMs (the Aussie dollar is currently worth about the same as the Canadian). British customers get a mix of £10 and £20 notes from their machines (the latter is worth about $40 Canadian), and in Japan – where, it is worth noting, muggings are virtually nonexistent – a ¥10,000 note (about $120) from a cash machine is nothing unusual.
Perhaps more importantly, if the Benjamin (and his dark beige, even less sexy Canadian cousin, the Borden) were to disappear, it would only be another step toward a society free of folding money. Scandinavia is leading the way in going cashless, but other countries (notably Canada) are not far behind. Cash has been pushed more into the realm of the small transaction, and making larger notes rarer or nonexistent will only help that transition along. Over in Germany, however, where 79% of transactions take place with cash, they’re less than pleased with such plans.
So here’s the one remaining question for Summers: How would you break the news to Fat Joe that he can’t make it rain with Benjamins anymore?