In the past few years, there have been discussions about finally getting rid of the $100 bill. A lot of people might find this choice surprising, but the truth is that the way Americans use cash has changed in ways that could be fixed by getting rid of this bill.
Since credit and debit cards (as well as cash) are used for most transactions these days, it may not seem necessary to worry about a piece of paper that many people think is going away soon.
However, the truth is a bit more complicated. Cash transactions have become less common, but they still make up a big part of all money transfers, both in terms of number and amount, and the $100 bill is a big part of them.
Reasons to eliminate the 100 dollar bill
Most people think of the economy as a clear set of rules, but in reality, cash is still the most important thing in the black market and the hidden economy. One of the best cases for this is made by Professor Kenneth Rogoff of Harvard University, who says that even though most of these bills are overseas, there are still enough in circulation in the United States that they could be encouraging crime.
This event shows what fiduciary paper money is like, which Rogoff calls a “crippling monetary policy.” Because of this danger and the fact that 60% of financial transactions in the US are done electronically, it seems like people are becoming less dependent on cash.
Even though his idea seems crazy, there have been a lot of illegal things that have happened that back it up. For example, the fact that $100 bills are often faked is a good example. North Korea, which is one of the hardest countries to understand, started a business making fake $100 bills that were used for both legal and illegal things. This hurt the economy.
This bill’s value is high enough that the reward is worth the risk, but it’s also low enough that it can still be used for everyday purchases almost anywhere that takes cash. It is less likely that higher-denomination bills will be faked in other countries where they are used because most businesses don’t accept them.
The “denomination effect,” a cognitive bias that changes how people spend their money, is another important thing to think about when looking at the $100 bill. Professor Helen Colby at Indiana University has found that students are less likely to spend a $100 bill than other bills with smaller denominations. This shows that high-denomination bills may be seen as more important, which makes people less likely to spend them.
Lastly, the $100 bill can be used for more than ten years, while lower-value bills become useless in less than two. This may not seem important, but the Department of the Treasury has helped get rid of broken bills by telling banks and stores not to accept them as payment.
This is meant to stop people from making fake money, since broken bills are harder to check. However, this could mean that fake $100 bills could be used for a very long time before they are taken out of circulation.
One idea for an answer is to bring back the 500-dollar bill. It would have some of the security features of the $100 bill plus a lot of the problems that come with using high-denomination bills while still being legal tender. We will just have to wait and see what the officials decide to do about it.
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