Imagine two shady characters, making a swap over briefcases. One ends up with cocaine or something, but the other opens his briefcase to reveal $100,000 in cash. Probably happens more frequently than you think.
Now imagine that the $100 bill no longer exists and they want to make the same transaction. That dude’s got to lug around five briefcases now and that’s not suspicious at all.
I’m making light of the situation, but a recent study by Peter Sands of Harvard gives a good argument that terminating big denomination notes would hurt criminal activity, and have little to no negative effects on us good guys whatsoever.
It’s not like $100 bills, or even more egregiously the 500 euro note, are necessary in this age of digital transactions. You’d get weird looks performing a legal activity with over a $1000 in cash, which says something rings true about Sands’ argument.
Terrorist groups, drug cartels, and other baddies use cash because it’s next to impossible to trace. The rest of society has adopted virtual money for the fact it’s traceable and people are able to step in to freeze compromised accounts.
Bruce Mann will tell you (in Econ 330: Law and Economics) that in America you don’t get ownership of lost and found objects totaling over a few hundred dollars. That is, unless the found objects are themselves dollars, because at that point the government can’t do nothing to get it back in the hands of the owner.
Having to use smaller currency for transactions makes it less convenient to do so and riskier to pull off, and simple economics says that these increased costs would reduce the number of people willing to perform illicit deeds. Good old 170 stuff.
Suffice it to say, I see the point in removing big currency from circulation, and see no point in keeping it. So let’s do that, and while we’re at it get rid of the stinking penny too.