Melinda Weir of IMF factors how the USD 100 payments stay extremely common.
A CURIOUS factor just lately occurred in US forex: in 2017 the $100 invoice overtook the ever present $1 invoice in circulation quantity, for the primary time in historical past. In different phrases, probably the most invaluable US banknote turned probably the most extensively circulated. (The $20 invoice is in third place.)
In response to the Federal Reserve, there are extra $100 payments circulating now than ever earlier than, roughly doubling in quantity for the reason that world monetary disaster (see chart).
So what explains this growth in Benjamins, because the payments are identified, particularly when cashless choices are growing by the day? On this age of Venmo transfers and digital every part, are People abruptly rising nostalgic for dollars in excessive denominations?
Not precisely. Whereas general demand for US forex is certainly on the rise, with $100 payments outpacing different denominations in each quantity and whole worth, most $100 payments are held overseas. In response to the Federal Reserve Financial institution of Chicago, practically 80 % of $100 payments—and greater than 60 % of all US payments—are abroad, up from roughly 30 % in 1980. The truth is, the common American retains solely about $60 in money readily available (Federal Reserve Financial institution of Atlanta 2018).
What are the explanations?
She factors to following causes: Secure Haven, Underground economics.
Regardless of these elements, USD 100 observe will stay:
Some outstanding economists, together with Rogoff and former US Treasury Secretary Lawrence Summers, have advocated phasing out high-denomination paper forex to discourage tax evasion and different types of corruption. India and euro space international locations have finished simply that in recent times: the Reserve Financial institution of India withdrew the 500 and 1,000 rupee payments from circulation and stripped them of their standing as authorized tender in 2016, with disruptive results, whereas the European Central Financial institution stopped producing and issuing the 500 euro observe in early 2019.
Nonetheless, there aren’t any indicators that Benjamins are on their manner out. Causes for protecting the $100 invoice embrace the expense of changing them with a better quantity of $50s, doable financial repercussions of such an motion, and the inevitable discount in seigniorage—the income a authorities makes from issuing forex. (A $100 invoice prices the federal government 14 cents to provide, leading to a tidy revenue; Rogoff argues that any losses could be offset by decreased tax evasion and crime.)
One wonders what Benjamin Franklin may make of all this. The US Founding Father, who famously suggested that “a penny saved is a penny earned,” is no longer solely the face of his nation’s most dear banknote, however probably of the world’s most in-demand paper forex. And regardless of nice technological strides in digital cost techniques, the recognition of his payments exhibits no signal of waning.
That is clearly incomplete. RBI did withdraw the 2 denominations, however reintroduced Rs 500 and launched even an even bigger denomination of Rs 2000.