Should the $500 banknote be revived?

Quote: AcesAndEights

Interestingly the little transparent section showed the most wear after I was done - the main body of the note still looked almost brand new after all that abuse.

We've had polymer 20 and 50 peso notes for some years now. Yes, they keep better, but for some reason they get torn a lot more than paper notes. I've no idea how that happens, as they resist tearing. But in the petty cash I handle, there's not a week I don't get a torn polymer note.

Quote: AZDuffman

Double edge sword when you do that. You can print money at will as there is more demand for it, the USA proves this. First there is a moral component that if you sink someone else goes with you. Then there is the part that when your currency is any kind of reserve currency you nearly have to run trade deficits to keep the international supply growing.

A few years back there was idle talk of CAD/USA currency union with Canada getting a Fed District and seat. Went nowhere, thankfully.

Iceland, with it's small population, compact geography, uniform demography, and high standard of living has probably adopted to electronic payments more than any other country in the world. Banknotes are of relatively small denomination, and had hovered around 1% of GDP since the early 1980's (until the banks crashed and the currency was massively devalued).


Canada has 100 times the population of Iceland, so even if the Iceland used Canadian currency there financial manipulations probably wouldn't be noticed by the Canadians. It would seem that the logical step before switching currencies is to first eliminate all cash transactions, so that the changeover means switching from an electronic system in Icelandic krones, to one in Canadian dollars. Otherwise the banknotes (and coins) would have to be procured at face value and shipped to Iceland.

The idea of Canada getting a seat on the federal reserve is pretty unlikely. The Canadian dollar is ultimately very dependent on the US dollar. I don't see it climbing to $1.20 in the next decade.

Incidentally, a country does not have to get the permission of the US government to adopt the US dollar. As a courtesy the BEP requests that they be given notice so that they can print the required banknotes. But when Ecuador and El Salvador adopted the US dollar, it was a unilateral decision on their part.

I do look at the Bank of Canada web site. I am curious if they new polymer money begins to circulate in Latin America at a much higher rate. It doesn't have to replace the US dollar, just share in the take.

Quote: Pacomartin

The idea of Canada getting a seat on the federal reserve is pretty unlikely. The Canadian dollar is ultimately very dependent on the US dollar. I don't see it climbing to $1.20 in the next decade.

Would only have happemed if there was CAD/USD unification.

Quote:

Incidentally, a country does not have to get the permission of the US government to adopt the US dollar. As a courtesy the BEP requests that they be given notice so that they can print the required banknotes. But when Ecuador and El Salvador adopted the US dollar, it was a unilateral decision on their part.

I'm not sure if this is "law" or a matter of "what are you going to do about it?" The stage was set when Panama just never even had their own currency but dollarized from Day-1. Even it you do not use US Notes you can do as The Bahamas and (fromerly) Argentina and have a 1:1 fixed ratio, supposedly with the greenbacks on account like a faux-gold standard.

Quote:

I do look at the Bank of Canada web site. I am curious if they new polymer money begins to circulate in Latin America at a much higher rate. It doesn't have to replace the US dollar, just share in the take.

I will be a doubter on this one for reasons of proximity, tradition, and convienience. When USD/CAD exchange moves from near-parity to something more traditional it would cause issues. Part of how they get the USD down there is traveling gringos and transfers from the USA, either legal remitance or the dope trade. Canada just does not interact as much on any level, and does not need to improt as much weed. Blame it on both proximity and population there.

Quote: AZDuffman

Part of how they get the USD down there is traveling gringos and transfers from the USA, either legal remitance or the dope trade. Canada just does not interact as much on any level, and does not need to improt as much weed. Blame it on both proximity and population there.

I have told Canadians that their government circulates roughly 2 dozen CAD$100 banknotes per household in Canada, and most of them are shocked. They tell me that Can Canadians almost never use cash, and they have not touched a CAD$100 bill in years.

I actually think there are a fair number of Canadians in Mexico. They totally outnumber Americans in the inland cities. Maybe a lot of Canadian money is already circulating . In Guadalajara you see signs at the money exchange wanting large Canadian banknotes as well as US ones.

The Japanese circulate a 10,000 Yen note which is by far the most popular note.
• The Japanese government is circulating roughly 7.5 billion of these notes (less than the 8-9 bill US$100 notes)
• The Japanese 10,000 Yen banknote is worth roughly US$121
• Japan has 40% of the population of the USA
• The Japanese money largely does not circulate outside of Japan
• Roughly 3/4 of the US$100 banknotes circulate overseas
• Given their role in computer and chip development, most Americans assume the Japanese are relatively advanced in electronic transactions
• Given the uniform demographics in the country, there should be relatively little illegal immigration that requires a heavy cash transactions

It is somewhat surprising that the Japanese economy is based on so many cash transactions. Unless you like Japanese movies, most Americans are unaware how many of the transactions are not above board. While not necessarily drug transactions, they are often designed to subvert tax laws.

The idea of a vast underground economy fits in with my stereotype of Italian economics, not Japanese. Of course, the reality is that our stereotypes are often widely incorrect.

Of course, it is possible that there really are not that many cash transactions, but that your typical household is sitting on a large cash hoard that they would rather not deposit in a bank.

This thread has got me looking at $500 and $1000 bills on eBay...depending on the quality the $500s seem to run anywhere between $700 and $2000, and the $1000s usually somewhere between $2-3K.

Damn, I really want one! Some day when I have more money...

Quote: AcesAndEights

This thread has got me looking at $500 and $1000 bills on eBay...depending on the quality the $500s seem to run anywhere between $700 and $2000, and the $1000s usually somewhere between $2-3K.

There were roughly eight million of these notes printed in 1928 and 1934 (almost evenly split between $500 and $1000). I don't know how many were turned in for destruction, but I am guessing not very many. They were unlikely to circulate much so they didn't wear out, and I am sure collectors got most of them rather than let them be destroyed.

The $10,000 banknote was printed in much smaller quantities (16,848 in 1928 and 45,760 in 1934). I suspect most of them were destroyed since they rarely circulated outside of the banking system. Also you would have to be very wealthy to keep such a note as a souvenir from 1928 to 2012.

Quote: Pacomartin

There were roughly eight million of these notes printed in 1928 and 1934 (almost evenly split between $500 and $1000). I don't know how many were turned in for destruction, but I am guessing not very many. They were unlikely to circulate much so they didn't wear out, and I am sure collectors got most of them rather than let them be destroyed.

The $10,000 banknote was printed in much smaller quantities (16,848 in 1928 and 45,760 in 1934). I suspect most of them were destroyed since they rarely circulated outside of the banking system. Also you would have to be very wealthy to keep such a note as a souvenir from 1928 to 2012.

There are some $10,000 notes up on eBay as well...one had a starting bid of $65K (or maybe that was the buy-it-now price). Internets are being crappy at my place right now so I can't find it.

Also, Wikipedia lists some figures on how many remain in circulation, but take them with a grain of salt, as always. $500 bill doesn't have an estimate, but they estimate 165,372 $1000 bills, 342 $5000 bills, and 336 $10000 bills "surviving."

Quote: AcesAndEights

they estimate 165,372 $1000 bills, 342 $5000 bills, and 336 $10000 bills "surviving."

That doesn't surprise me. If they printed 4 million $1000 bills, most people could figure that depositing a $1000 in some bank account with minimal interest would be far more profitable than the collectible value of the note in the future. Most of the larger notes were bank to bank transfers before electronic transfers became important.

The value of currency in circulation at the beginning of Obama's term on 2009-01-21 was $884.889 billion . As of 2012-11-21 it is $1,149.806 billion.

The physical problem of producing a reliable anti-counterfeiting banknote in these quantities is an issue for all these currencies.

I have often thought that they should follow the lead of the casinos, and produce chips with RFID devices in them. So far no one has ever been able to embed RFID into a banknote because they don't survive the bending and folding. Given that chips weigh roughly 10 times as much as banknotes, it implies that they should skip $500 and go to $1000. But even if the RFID makes them reliable against counterfeiting, then there will be concern about making something worth $1000.

But from the point of view of illegal transport of money, if the casino chips weighs 10 grams and is worth $1000, and a 1 gram banknote is worth $100 then the value per weight is the same.

Of course if the chips are no longer anonymous it raises all sorts of issues. If you are pulled over and the police find a bag of $1000 chips, and the RFID shows that 90% of the chips used to belong to Guido, the recently murdered mafia guy, then presumably you become a suspect in his murder.

The Japanese have a similar problem. Their 1984 series looks like:


The new series was issued on November 1, 2004


After only 11 weeks the 1984 series of money was virtually suspended, because of fear of counterfeits.

The problem is that now there are many billions of notes in circulation and constantly increasing. As we said before USA has never suspended any currency that they have ever issued.

Although it looks like the EU issued billions of notes at once, they spent a decade designing the notes and producing them in advance for the big day.

How the U.S. Could Pressure North Korea Tomorrow: Quit the $100 Bill
Wolman is a contributing editor at Wired and the author of The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society, out this month from Da Capo Press. Follow him on Twitter: @davidwolman.

Quote: TIME: Economy & Policy

By David Wolman Feb. 24, 2012
U.S. negotiators are heading into a second day of what have been dubbed “serious and substantial” talks with North Korean officials. Yet amid all the discussion of how the U.S. will attempt to work with Kim Jong Un, there has been little (open) speculation as to whether Dear Leader Junior might crank up production of $100 and $50 bills. No, not North Korean 100- or 50-won banknotes, worth about as much as old tissues. I’m talking about fake greenbacks — or as the U.S. Secret Service has dubbed them, “superdollars.”
...
These ultra-counterfeits are light-years beyond the weak facsimiles produced by most forgers, who use desktop printers. As an anticounterfeiting investigator with Europol once put it, “Superdollars are just U.S. dollars not made by the U.S. government.” With few exceptions, only Federal Reserve banks equipped with the fanciest detection gear can identify these fakes.
...
Yet as unpatriotic as this may sound, perhaps America would be better off if Kim Jong Un were to try and enrich himself with DIY Benjamins. Let me explain, by way of a little background about superdollars.
...
Since the superdollars were first detected about a decade ago, the regime has been pocketing an estimated $15 million to $25 million a year from them. (Other estimates are much higher — up to several hundred million dollars’ worth.) That sounds like a lot of money, but compared to the $1 trillion in cash circulating in the great ocean of commerce, a few hundred million is chump change. Although costly for small-business owners who unknowingly accept a bunch of forgeries, counterfeits probably won’t bring about a crisis of faith in our paper money anytime soon.
...
(Coins, however, we could — and should — do away with. As in, right now.)

David Wolman has been a big proponent of stopping production of coins, and only using banknotes of value no higher than $20. He considers all coins (not just pennies and nickels) as a waste of time and energy.