## The Boom in Benjamins — What makes the US $100 bill so popular?

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### Overview
- In 2017 the $100 bill overtook the $1 bill in circulation volume for the first time in history.
- The $20 bill is in third place.
- US $100 bills have roughly doubled in circulation volume since the global financial crisis.
- Most $100 bills are held abroad rather than domestically.

### International demand and safe-haven status
- Nearly 80 percent of $100 bills are overseas.
- More than 60 percent of all US bills are overseas, up from roughly 30 percent in 1980.
- Fed economist Ruth Judson: overseas demand for US dollars is likely driven by its status as a safe asset; cash demand from other countries increases in times of political and financial crisis.
- The 2002 debut of the cash euro coincided with a stabilization or decline in international demand for US dollars until late 2008, when the global financial crisis triggered renewed demand for US banknotes.
- The dollar’s role as the dominant international reserve currency is cited as a key reason for its unique foreign-held share relative to other currencies.

### Underground economy, anonymity, and other drivers
- IMF Assistant General Counsel Nadim Kyriakos-Saad highlights the contribution of the underground economy, informal economy, and criminal economy to the appeal of large denomination bills.
- Increasing digitalization of payment systems raises concerns about traceability; some demand for cash reflects a desire for privacy and anonymity, which can be legitimate.
- Kenneth Rogoff (Harvard) asserts that worldwide, high-value currency notes are mainly used to avoid taxes and regulation, and for illegal activity; he also notes rising underground demand may be related to exceptionally low interest rates and inflation.

### Policy debate and options
- Prominent economists (including Rogoff and Lawrence Summers) have advocated phasing out high-denomination paper currency to discourage tax evasion and other corruption.
- Recent comparable policy actions elsewhere:
  - Reserve Bank of India withdrew the 500 and 1,000 rupee bills from circulation and stripped them of their status as legal tender in 2016 (with disruptive effects).
  - European Central Bank stopped producing and issuing the 500 euro note in early 2019.
- Reasons cited for retaining the $100 bill:
  - Expense of replacing $100 bills with a higher volume of $50s.
  - Possible economic repercussions of withdrawing the $100 bill.
  - Reduction in seigniorage if the $100 bill were removed.
- Cost and seigniorage detail:
  - A $100 bill costs the government 14 cents to produce, yielding seigniorage profit.

### Domestic cash usage and distribution
- The average American keeps only about $60 in cash on hand (Federal Reserve Bank of Atlanta 2018).
- Despite increasing cashless payment options, the popularity of the $100 bill shows no sign of waning.

*Source: Finance & Development, June 2019 — “What makes the US $100 bill so popular?” by Melinda Weir*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2019/june/what-makes-the-us-100-bill-so-popular-currency.pdf_