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A 2018 Federal Reserve Bank of Chicago research paper estimates that 60% of all US banknotes and nearly 80% of all $ 100 banknotes are now overseas. That amount rose from 15 percent to 30 percent by 1980, according to research by Federal Reserve Board economist Ruth Judson. She found that economic and political instability contributed to this demand.
Projecting future demand for the US currency is "challenging" and depends on how fast the economy grows, interest rates, new payment technologies, and whether people in other countries continue to regard dollar bills as a useful asset – "all factors that are to say the least, uncertain," according to the Chicago Fed.
An increase in digital payments may be contributing to lower demand for lower nominal value accounts. Rising smartphone usage, a shift toward online shopping, and bandwidth improvements have increased the volume of global digital commerce above the $ 3 trillion mark in 2017, according to a recent McKinsey report. That is forecast to more than double by 2022, according to McKinsey.
There was pressure to get rid of high-value bills to contain international crime. Summers, a former secretary of the Treasury and director of the White House National Economic Council, called for a $ 100 abolition. Summers wrote an editorial in the Washington Post in 2016 entitled "It's time to kill the $ 100 bill."
"A moratorium on printing high-grade new notes would make the world a better place," Summers said, citing his potential for crime. "Here is a step that will make a global contribution with the least possible impact on legitimate trade or government budgets. It may not be a free lunch, but it's a very cheap lunch."
He referred to a Harvard research paper written by former Standard Chartered Bank chief executive Peter Sands, who argued in favor of eliminating high denomination bills and high monetary value.
"By eliminating high-value, high-value banknotes, we make life more difficult for those seeking tax evasion, financial crime, terrorist financing and corruption," Sands wrote.
Global illicit money flows have been "staggering" and fueled crimes ranging from drug trafficking and human smuggling to robbery and fraud, Sands said. He estimated that, depending on the country, tax evasion robs the public sector of anything between 6% and 70% of what authorities estimate they should collect. And despite the "huge investments in transaction and intelligence surveillance systems, less than 1% of illicit financial flows are seized."
Shortly after the document was published in 2016, the European Central Bank (ECB) announced that it would stop producing the € 500 bill, raising concerns that it could facilitate illegal activities. Despite similar pressure on the Fed, Colas is not optimistic that they will take the same steps as long as money distribution is still profitable.
"The Federal Reserve and the Treasury make $ 99 for every $ 100 they print and sell overseas," said Colas. "There is a natural desire to continue to print these things – the US government makes a lot of money by selling them."
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