The novelty of the banknotes has it that the United States of America will be pulling out the $100 bill with the picture of Benjamin Franklin. Such decisions have been based on several factors such as negative activities it facilitates, for instance, counterfeiting and another the move towards the digital space for transactions. Here’s a breakdown of why exactly the $100 banknote is to be phased out and what this means for the further evolution of cash in the United States.
High-denomination bills: The unknown tool of criminals’ organization
The $100 bill can no longer be used for any legal standard since it is often linked to legal acts. The use of high denomination currency is not only involved in money laundering exercises, evasion of tax and even terrorism. These large bills are lovely to criminals because of the ease of carrying and concealing huge amounts of money. This makes the $100 bill the optimal currency for use in illicit trades as well as for use in other unlawful activities.
Harvard economist Kenneth Rogoff has long called for the scrap of large notes such as $100. He thinks that minimising the inclination to use large amounts of money through cash may help to hamper unlawful actions. The very nature of electronic transactions promoted these crimes as such activities are easier to trace and regulate thus, law enforcement should be useful in counteracting such crimes by tracking suspicious financial activities more easily.
Why digital payments are replacing cash: It’s the future of transactions.
With the current economic changes, fewer people use cash to make their expenditures. The use of commercial credit card payments smartphones such as Apple Pay Google Wallet and even bitcoins have altered the ways through which transactions happen. More than $4 trillion in payments in the United States occur non-cash, and the trend is rising due to the availability of electronic options.
Over time especially with the rising novelty in the adoption of digital money, large notes have tended towards illicit use and cash stacking. In a bid to move to more traceable methods of payment, central authorities have set their sights on phasing out the $100 bill. Not only does it prevent criminal activity but it is also a society where the move toward a cashless environment is prominent.
It is not only common with criminals to possess $100 bills but also a favourite to counterfeit as well. The modern fake money replicas use watermarks and holograms, but nowadays even a $100 bill can be easily counterfeited. In one horrific incident that made headlines, the North Korean government was said to have been involved in the creation of “supernotes”, which are virtually hard to tell from the original currency.
Global lessons: How other nations are planning to eliminate high-denominated currency notes
It would also help in the view of economists who posit that getting rid of huge notes such as the $100 bill will dramatically cut the chances of counterfeiting. Burdensome money is mostly selected by criminals because they will get more value for the same risk as compared to low-value bills. Eliminating these bills enhances stability in the pecuniary system since it minimizes the opportunity for forgery while enhancing confidence in the monitory system.
The United States is not the first country ever to think of ditching large notes or high-value currency notes. The €500 note was seen as causing problems and thus in 2016, the ECB stopped the circulation of the note. This decision was based on the same reasons since the €500 note was used in drug dealing, money laundering and other unlawful activities.
India also carry out the demonetization exercise by removing ₹500 and ₹1,000 notes. Although this decision was heavily criticized their intention was to fight corruption and thus support digital payments. These cases indicate how countries are trying to manage high denomination cash given the advancement in technologies.
Economic implications: The way how this change could affect the financial policies in America
Eliminating the $100 bill has the potential to affect the overall policy on money. In those hard times, central banks are known to apply long-term negative interest rates to correct this behaviour. However, high denomination notes enable people to hold cash and the evasion of policies such as this one. When $100 bills cannot be easily stuffed in shoes, cash holding reduces making the economy more manageable by central banks.
This change also removed cash storage by individuals and institutions and would help to enhance spending as well as investment. It only takes better monetary policy control by the government to make certain that economic measures will have the desired effect on the economy.
The decision to stop the production of the $100 bills is the picture of the trend of going cashless in society. Despite this decision may appear radical, it effectively tackles real problems such as crime, counterfeiting and monetary policy difficulties. Where technology is concerned, the shift to a cashless society is almost, if not fully inevitable in the future. America’s decision could trigger the start of a new era of safe and efficient financial policy with the help of changing directions following the example of other countries that are ready to do it.