The Boom in Benjamins

• Author: Melinda Weir
• Position: Staff of Finance & Development
• Pages: 60-61

60 FINANCE & DEVELOPMENT | June 2019

CURRENCY NOTES

A CURIOUS

thing recently happened in US currenc y:

in 2017 the $100 bill overtook the ubiquitous $1

bill in circulation volume, for the first time in

history. In other words, the most valuable US

banknote beca me the most widely circulated. (e

$20 bill is in third place.)

According to the Federal Re serve, there are more

$100 bills circulating now than e ver before, roughly

doubling in volume since the global fina ncial crisis

(see chart).

So what explains th is boom in Benjamins, as the

bills are known, especi ally when cashless options

are increasing by the day? In this age of Venmo

transfers and digital every thing, are A mericans

suddenly growing nostalg ic for greenbacks in

high denominations?

Not exactly. While overall dema nd for US cur-

rency is indeed on the rise, with $100 bills outpac-

ing other denominations in both volume and total

value, most $100 bills are held abroad. According

to the Federal Reser ve Bank of Chicago, nearly 80

percent of $100 bills—and more than 60 percent

of all US bills— are overseas, up from roughly 30

percent in 1980. In fact, the average American

keeps only about $60 in cash on hand (Federa l

Reserve Bank of At lanta 2018).

Safe havens

Geopolitical instabi lity could be one reason behind

the surge in $100 bills, according to Fed economist

Ruth Judson. “Overseas demand for US dollars is

likely driven by its status a s a safe asset,” Judson

told the Richmond Fed’s Econ Focus in 2018. “Cash

demand, especial ly from other countries, increases

in times of political a nd financial crisis.”

And the world has hardly seen a s hortage of crises

in recent years.

According to a 2017 paper by Judson, interna-

tional demand for US dollars increa sed over the

1990s and into the early 2000s, and t hen stabilized

or declined after the 20 02 debut of the cash euro.

is decline in demand continued u ntil late 2008,

when the global financia l crisis triggered renewed

demand for US banknotes.

Where exactly t he $100 bills are these days is

impossible to know for sure. Whether it’s a conflict

or refugee crisis in the Middle East or turmoil in

Venezuela, it’s easy to imagine the importance of

cash—particularly hig h-value, globally accepted

currency—in un stable regions. Distrust of loca l

currency is also t hought to be a contributing factor.

Underground economics

ere are, of course, other plausible explanations

for this phenomenon.

IMF Assistant General Counsel Nadim Kyriakos-

Saad is an expert on international anti-money-

laundering efforts. “e underground economy, the

informal economy, the criminal economy—all of it

contributes certainly to the appeal of large denomina-

tion bills.” With increasing digitalization of payment

systems in recent years, Kyriakos-Saad says, concerns

about traceability could be a factor. But it’s incorrect

to always associate cash with corruption, he says.

“ere’s this lingering desire for privacy, and desire

for anonymity, which can be entirely legitimate.”

Top dollar

US $100 bills have doubled in circulation volume since the global nancial crisis,

overtaking the $1 bill.

(billions of notes)

Source: US Federal Reserve Board of Governors.

1998 2000 02 04 06 08 10 12 14 16 18

$1

$2

$5

$10

Currency, 4/11/2019

0

2

4

6

8

10

12

14 $20

$50

$100

The Boom in Benjamins

What makes the US $100 bill so popular?

Melinda Weir