Should the $500 banknote be revived?

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January 9th, 2013 at 1:19:22 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 930
Posts: 10971
Quote: odiousgambit
This combination seems odd. How would you do a transaction where you buy something that's less than $20?


Most of the electronic payment techniques are dominated by the private sector today. They pay their way by taking a percentage of the transactions. The seller is the one to pay the percentage, but presumably passes on the expense to the consumer. However, I can still get my hair cut for $12 from an elderly barber who refuses to take credit cards and has no cash register (just a wad of bills in his pocket).

In order to eliminate coins you would need the full weight of the government to subsidize cards (or electronic phone apps) to permit small transactions electronically. Right now VISA is not interested in most transactions below $10, and sellers (other than giant chains) often don't permit them. Canada is actively pushing to develop technology for small transactions.

Right now the US mint is a disaster. Half the coins they make are pennies which cost more than a penny to make. Nickels cost more than 5 cents to make. Nobody likes half dollar or dollar coins. Dimes are increasingly not in demand. Only the quarter can be characterized as a successful coin. Almost everyone will bend over to pick up a quarter off the street.

Instead of the government spending all of that money to make coins that nobody wants (in two locations so if one of them get bombed the other one can keep making coins) it should be easier to install a nationwide system based on credit cards where you have a credit card shaped "electronic purse" where you can download money into, and make exact transactions. For person to person you might have a common application on smart phones.

Hopefully this technique will also vastly reduce the need for $1 banknotes as well. There are not that many $5 and $10 banknotes in circulation. The $20 is mainstay of small commerce. You could probably eliminate the most unpopular banknotes (the $2 and the $50) and most people wouldn't notice.

The $100 banknote is another story entirely. Right now there are more $100 banknotes in circulation than $20 banknotes. The Benjamins account for over $800 billion of $1169 billion circulating in Federal Reserve notes and coin.
January 9th, 2013 at 1:06:49 PM permalink
AcesAndEights
Member since: Oct 24, 2012
Threads: 5
Posts: 286
Tried with a different email address and it magically worked. My primary address is a forwarder maintained by my alma mater...sometimes it's wonky.
"You think I'm joking." -EvenBob
January 10th, 2013 at 4:03:50 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 930
Posts: 10971
Quote: AcesAndEights
Tried with a different email address and it magically worked. My primary address is a forwarder maintained by my alma mater...sometimes it's wonky.


Thank you for your signature. The feedback I've gotten is pretty bad. Many people assume a bigger banknote will automatically weaken the currency. Other people say only criminals use big banknotes and they are being fazed out.

I only had 800 words to write the petition, so I tried to anticipate these questions, but it seems most people either don't read the words or think about it. I think if you have 8 billion $100 banknotes, and you replace them with 1/3 billion $1000 chips = $300 billion and 5 billion $100 banknotes that it is an even exchange.

Also if the casino chip currency weighs 10 grams it doesn't change the weight you have to move. The RFID chips would actually give some support to law enforcement.

Mind you the RFID chip would only reveal locations where the currency chips were last checked for counterfeit. You could see New York (2 weeks ago), Chicago (4 weeks before that ), London (6 months ago). You wouldn't have a list of names who owned the chips.

The information would only be useful to law agencies who are confronted with a pile of cash. Insight into what cities the currency chip comes from would only help if significant percentages come from Los Angeles and Monterrey Mexico and Delhi India.


A gambler who might have 8 of these chips would have no loss of privacy. Knowing where these 8 chips were last checked would not reveal much information.

The US currency is up to $1.169 trillion as today (2013-01-02) you can see from this chart that it was at $0.825 trillion at the end of 2007, and was $0.400 trillion and $0.500 trillion in 1995 when they began the big headed hundred dollar bills. The federal government is doing very well in increasing the currency supply using the old money, the casino chip currency would simply decrease costs and help with the debacle of replacing the currency with the new color $100 banknote.

March 5th, 2013 at 1:14:16 AM permalink
1nickelmiracle
Member since: Mar 5, 2013
Threads: 16
Posts: 549
We used to have $10,000 bank notes. The government got rid of them because it was too easy to steal large amounts of money. The more cash there is, the more control banks and the government has over people and they will not give this up. They have to know about every penny and can't be bothered with due process taking money from anyone they feel owes them.

Edit: There were $100,000 bank notes but were not circulated and were only for bank to bank transactions.
Sounds like a hit song would follow the $100,000 being printed, "I have a million dollars in my pocket".
March 5th, 2013 at 7:26:10 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 930
Posts: 10971
Quote: 1nickelmiracle
We used to have $10,000 bank notes. The government got rid of them because it was too easy to steal large amounts of money.


It is all a question of scale. Canada has 1/9th of the population of USA, and they are circulating 1/3 billion $100 banknotes. Almost all of them are circulating within Canada, with a relatively small percentage circulating in places like Mexico. They can replace all their paper $100 banknotes with polymer ones in a few months. The government there used to issue a $1000 banknote, but they withdrew it from production because of concerns about organized crime using the note.

The USA has over 8 billion Benjamins in circulation, of which at least 75% are circulating overseas. Replacing the stock of banknotes in circulation is a major task and it will only grow ever larger in coming decades.

If Canada had a counterfeit crisis and many people believed that there were large numbers of fake $100 banknotes produced (like UK did after WWII), they could probably deal with it without a major glitch in their financial system. People would stop accepting the banknote, and you would have to turn them into banks to get some smaller notes, or simply leave them in bank accounts. It would be a matter of inconvenience to some businesses like used cars.

If USA had a counterfeit crisis with the $100 banknote, it would have massive impact around the world as people rushed to change their banknotes into Euros or some other store of value. The purchase of the $100 banknote by other countries is a big revenue source for the USA. Replacing the circulating stock of 8 billion notes would take years. The assumption of this argument is that a $500 or $1000 banknote (or chip) would have security devices that they could not afford to put in the $100 banknote.
March 5th, 2013 at 8:40:39 AM permalink
1nickelmiracle
Member since: Mar 5, 2013
Threads: 16
Posts: 549
I never understood how circulating newly designed bills to thwart counterfeiting would do anything about those continuing to counterfeit the allowable money in circulation if someone wanted to print bills from 1950 or 1980. I think small entrepreneurs are not worried about, but large counterfeiters bringing large, large amounts of money to the bank would not pass scrutiny.
I don't think politically people would want chips in the money yet. I would guess if money was numbered(the devil, not), those who really control the society would be the biggest objectors because hypothetically the systems could be hacked and the public could find out how much everyone in the US has.
March 5th, 2013 at 8:48:16 AM permalink
1nickelmiracle
Member since: Mar 5, 2013
Threads: 16
Posts: 549
Everyone wants to talk about gold being the currency backer, but there is a future danger. The core of the Earth has enough gold to wrap the surface of the planet in 1.5 feet of gold. I would not want someone thinking in the future trying to get it was worth the risk. I think the perfect system for all would be to try to find a way to link the money to land. It would be a bit difficult to figure out the system, but it would be better for those without centuries of gold hoarding to manipulate the world with. A balance approach could work somehow perhaps.
March 5th, 2013 at 9:09:24 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 930
Posts: 10971
Quote: 1nickelmiracle
I never understood how circulating newly designed bills to thwart counterfeiting would do anything about those continuing to counterfeit the allowable money in circulation if someone wanted to print bills from 1950 or 1980


The money may be legal currency, but that doesn't mean you have to accept it. For all practical purposes the old small headed $100 banknotes produced prior to 1996 are not circulating anymore as currency. The existing ones are in collections. While a bank must accept them, it doesn't mean a retailer or a private individual must take them.

President Bush chastised the North Koreans for producing counterfeit US Money in his state of the Union speech in 2006. Overseas, many people will not accept the 1996, 1999, 2001, and 2003 series $100 notes. They only want the 2006 series notes. You can make a valid argument that they are stupid, because if someone can counterfeit the $100 banknote, they can certainly update the year. It doesn't matter if you think it's stupid. All that matters is they won't take your cash.

Fortunately, there are over 5 billion 2006 series notes in circulation. While that is not enough to meet demand, you can usually find enough if you are taking cash overseas. Just keep that in mind if you are travelling to Africa or Asia.
March 5th, 2013 at 3:00:02 PM permalink
1nickelmiracle
Member since: Mar 5, 2013
Threads: 16
Posts: 549
My grandpa who was born in 1902 repeatedly told me because of the phrase "This debt is legal tender for all debts public and private." meant if anyone ever refused it, you legally don't owe them the money. How? I don't know besides quoting the phrase.

I also appreciate all the insight.
March 5th, 2013 at 7:06:53 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 930
Posts: 10971
Quote: 1nickelmiracle
if anyone ever refused it, you legally don't owe them the money.


Wikipedia specifically says that "The law does not relieve the debt obligation until payment is accepted."

I did speak to a woman who told me that she took a pile of $100 banknotes to Africa and had to bring them back because they would only take the 2006 series. Unfortunately, she did not speak to me before she went, as I was aware of people complaining on travel forums about refusing their banknotes.

I have never heard of anyone in the USA refusing the 1996-2003 series. However, I could easily imagine people refusing the small headed series before 1996, as they would be worried about counterfeits. Most of the banknotes are gone from circulation. I don't think a bank would ever reject them, although they may make you wait while they run counterfeit checks.

Vendors are legally allowed to refuse to accept large denomination banknotes, and many of them outside of Nevada and big cities do so regularly. In Britain venders regularly refuse to take £50 banknote (worth $80), as the British have been reluctant to embrace large notes since the great counterfeit operation in WWII (Operation Bernhard). The £50 banknote was only issued on 20 March 1981, is on it's third style, and still circulates at slightly over 3 per capita (drastically below most Western countries).

Brits circulate roughly £1000 bank notes and coins per capita, but only slightly over £150 of it is in £50 banknote.
Canadians circulate about $2000 in bank notes and coins per capita, but $900-$1000 of it is in the $100 banknote.
USA circulation is getting close to $5000 per capita, but most of it is overseas.
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