Here Is The Real Reason Why Authorities Want To Ban High Denomination Bank Notes

Tyler Durden's picture

Over the past month, one of the more alarming developments in Europe has been the move to eliminate high denomination bank notes like the €500 bill.

Indeed, as Bank of America reports, having changed its mind on the matter over the past few years, the ECB is now considering abolishing the €500 note. In a recent interview, Executive Board member Benoit Coeure said that "the ECB is assessing the fate of the €500 euro banknote, as concerns about its use in money laundering and crime grow and its usefulness for large payments comes into question" adding that "competent authorities increasingly suspect that they are being used for illegal purposes, an argument that we can no longer ignore." (like all other ECB matters, there appears to be infighting on this issue too, and subsequently another ECB member Yves Mersch stated that the he would like to see "proof that high-denomination notes are used by criminals").

So what, big deal, eliminate it. The people will still have 5, 10, 20, 50, 100 and 200 euro bills right.

Well, here's the thing: the €500 note is the second highest currency denomination in G10, after the CHF1,000 note. More importantly, the total value of €500 notes in circulation amounts to €306.8bn and has been rising.

As a share of the value of total euros in circulation, the €500 note is the second-highest, after the €50 note.

In other words, if overnight the €307 billion worth of €500 bills were eliminated, the notional value of the entire amount of European physical currency in circulation would decline by 30% to €700 billion!

And there you have it: while it may not be banning all European cash outright, we are confident the ECB would be delighted if one third of it was to start, while pretending to be fighting financial crime, terrorism, corruption and dryg dealers. 

Of course, what Europe would be truly doing is setting the scene for ever more aggressive NIRP, and by removing the highest denomination bank notes, it would make evading negative that much more difficult and costly (albeit would certainly favor gold).

Here Bank of America points out that while abolishing the €500 note may even end up weakening the EUR currency. This is what it said:

"we would expect that abolishing a note that represents almost 30% of the total Euros in circulation would be negative for the currency, keeping everything else constant. The share of the €500 note in the total value of Euros in circulation has been falling since 2009 and this has coincided with a weakening Euro in real effective terms. This is not evidence of causality, but we should not ignore it.

 

If we are right, the Euro will weaken, primarily against the USD and the CHF. The USD is the most liquid currency and we would expect it to capture a large share of the drop in the demand for the Euro as a store of value. However, the CHF could also benefit, having the largest note denomination in G10 economies. Indeed, the CHF1000 note is already very popular, representing more than 60% of the CHF  notes in circulation, unless the SNB follows the example of the ECB and also abolishes the CHF1000 note.

Maybe not: the EUR would certainly not weaken against the Dollar if at the same time as Europe is eliminating its highest denomination bill, the US were to likewise to eliminate its own "high denomination" bills. This is the push by current Harvard School of Government senior fellow Peter Sands who recently was booted from beleaguered British bank Standard Chartered (whose exposure to China is among the highest in Europe).

Sands appeared on CNBC earlier today to double down on his "modest proposal" that the US should eliminate its highest denominated bill, aka the Benjamins, because doing so would "deter tax evasion, financial crime, terrorism and corruption."

 

Ok fine, remove the $100 bill: surely it won't affect much right.

Wrong. As the latest Treasury data shows, $1.08 trillion of the total $1.38 trillion in physical US currency exist in the form of $100 bills.

 

Chart of value of currency in circulation, excluding denominations larger than the $100 note. Details are in the Data table above.

 

In other words, there is now an all too explicit "trial balloon" push to ban the one banknote that accounts for a whopping 78% of all US currency in circulation.

So there you have the real reason why suddenly high denomination bank notes are the target: it is not because "drug dealers" and tax-evaders use them, but because between banning Europe's €500 bill and the US $100 bill, over 56% of all physical currency currently in circulation in Europe and the US would disappear.

And all in the name of "fighting crime", when the real reason is to set the stage for NIRP and to progressively move down the chain and ban increasingly smaller denominations.

Will this drive to start the elimination of physical cash succeed? We don't know, but for once the Greeks are far ahead of the curve. As Kathimerini reports, "citizens who keep cash outside the banking system are running in droves to bank branches to ask for details and clarifications on reports that the European Central Bank is planning to withdraw 500-euro notes."

With the country already in a seven-year crisis, many people have opted to hide their money at home, in vaults, mattresses and other places. Banking sources say that many people have chosen 500-euro notes because they are more practical for carrying and hiding – after all, just 20 such notes come to 10,000 euros.

 

In 2015 alone deposits in Greece declined by 40 billion euros, with banks estimating that at least 20 billion of that went into safe deposits and mattresses.

 

Following the publication that European authorities were questioning whether it makes sense to have 500-euro notes in circulation, many in Greece – especially older people – rushed to deposit the money in their accounts. ECB governing council member Benoit Coeure spoke yesterday in favor of the withdrawal of the largest notes, stressing that the ECB will make a decision to that effect soon.

 

A new Morgan Stanley survey on Greece showed that 80 percent of people who withdrew their deposits from the banking system in recent months have not returned them, with 93 percent being determined not to do so. The survey also found that confidence in the Greek banking system remains low, as 62 percent of people are uncomfortable about placing money in a bank account.

Naturally, by removing the highest denomination bank note, all Europe would do is make it that much more difficult to find alternatives to holding large amounts of money in physical form and thus outside the banking system, where money is about to be taxed with negative rates.

There is the question whether this no to clever ploy will backfire, and instead of forcing people out of cash, instead lead to a run on bank cash, which will then be converted into physical precious markets. The Greeks have already figured it out; we wonder how long until the US population follows suit.

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NoDebt's picture

First person even says the word "BitCoin" gets it right in the neck.  Say it and "you know who" will show up like fucking Beetlejuice two seconds later.

max2205's picture

I hate this moar than QE...

 

May they all die a horrible death 

SILVERGEDDON's picture

Not a surprise that hundies and the Big Euro note are over half the money supply.

Fucking hundred dollar bill doesn't even buy what a twenty spot used to.

American Zimbabwe.

Hundred dollar bill, soon to be replaced by the thousand dollar bill.

SO YOU DON'T NEED BULGING CARGO PANTS POCKETS JUST TO GO SHOPPING FOR A WEEKS WORTH OF FUCKING GROCERIES.

My mom used to feed a family of six on $35.00 a week.

Wi Ar Fukd.

Arnold's picture

Nice pickup on the bills, Tylers.

Demdere's picture

They want to encourage electronic transactions so they can track everything.  But once we use electronic, the currency doesn't much matter.  Instant over-the-net money changers will arive, so any bill can be paid in any currency at the latest market rate.

Bitcoin will be one of many.  Soros could have his own, your town could have its own, your tribe ...

 

WillyGroper's picture

notice that lil stripe on them thar newer hunerds?

they can already track it.

Bemused Observer's picture

There's no 'lil stripe' on any of my gold or silver...Guess they can't track that. Too bad.

hansg's picture

Does your own message count?

indygo55's picture

No, people will just cash them in for twenties and then there would be that much more twenties in circulation required to do that. Are you really going to take a 100 and then just deposit it? No you are going to change it for 5 twenties so they will have to print more of those. Even less control they will have. Dumb-asses!

Purpurroter Regen's picture

CUT the HEAD of the BEAST. The FED is as Federal as Federal Express. The corrupt Federal Reserve is NOT Federal >> >> https://goo.gl/2SIIh0

NoDebt's picture

Agreed.  The cognitive dissonance and group think at today's astounding levels can only happen under a regime of full spectrum dominance.  There is no single head to cut off.

weburke's picture

a large pile of twenties with rfid will send a lovely hello there to the money hunting radar

The Grim Teacher's picture

 

I reckon about 3-6 seconds will do it. Just like ze Germans do with their national ID cards; zap them in the microwave as soon as they get them, you can see in the vids posted on Youtube when the chip implodes :-) 

BullyBearish's picture

Maybe, but it would be a good start...

richinSpirit's picture

I believe it likely "the beast" ends up being some kind of advanced information system, such as a quantum computer or group of such, and see the fed and BIS-based group of central banks as the whore of Revelation. That thought first occured to me as a child noting the reference in my childhood bible regarding the application of "he" to the beast: Some manuscrpts say "it".

I'm almost 40. In the early 90's, when Scientific American published an article about some of the algorithms developed for quantum computers (factoring large numbers - death to prime-number based encryption; faster and faster searching of databases vs digital computing the larger those DBs get - more effective one-world .gov adminstration of details; generating truely random numbers - suggestions?) I really gave the manuscripts that say "it" the nod for accuracy.

I can just see it now, "The all-knowing box says we should...". Then central bank "money changers" make the currency out of thin air that is ultimately used (through purchasing of treasuries or inflating the equity markets, not sure if such a thing might get made somewhere like the NSA first or someplace like Google) to accomplish the goal. Very simplistic example, but we aren't writing books here.

matermaker's picture

This argument is so silly.   They get rid of cash and what is the FIRST thing people that are driven by human nature do?  They acquire assets to park wealth in.  Make gold illegal, sure.  So what?  Then people will be hoarding guns, chainsaws, chickens, electronics... ANYTHING they feel is a tangible good that is under their control  This would be one of the best ways on Earth to make people loose faith in fiat money as a store of wealth.  Ever notice that when a inner city riot breaks out the majority of folks aren't tearing out the ATM machines but walking home with stuff from the liqour, jewlery and electronic stores?

buzzsaw99's picture

idiots. no wonder gold is catching a bid.

matermaker's picture

Fiat paper money is a commodity.  Gold is a commodity.  They are ways to measure the stored wealth of one's productivity/work.  The moment 'money' is no longer in your control or even tangible in your hands, it will cease to be the most sought after commodity.  Not to mention how assinine it is to think that people would react how all these articles suggest.  "oh, I have a store of wealth.... I better go spend it before the banks take it!"

matermaker's picture

Hell, it's not just human nature.   A squirrel hiding his nuts.  A dog burying his bone.  A magpie stealing shiny things.   To suggest that Bankers can get 8 billion people to shirk their genetic natures and go along with "trust us, we will tell you how much you are worth..." is beyond hubris and it's actually kind of funny that you kids get so worked up about it.

richinSpirit's picture

If their goal is the simplistic "raising the country's GDP/score" by increasing spending vs saving, then when people "spend" the currency on a better store of value, to attempt to save their spending power, as their currency is being debased (like what was happening in the Weimar Germany hyperinflation's last stage), these imbiciles/evil money-changers will point to the increased "spending" of the currency as success. Perhaps they would throw a victory party for everyone after the GDP numbers came in if we have and spend 47-quadrillion dollar notes at some point in this monetary-suicide attempt at trying to pump up the equally-idiotic "GDP" metric for economic-success measurement.

stant's picture

"We want your ass broke"

UNCOMPROMISED's picture

Bring the ban. Chaos is the plan.

Prepare my friends.

NoDebt's picture

It's too late.  They've already got this revved up and framed as YET ANOTHER ISSUE that's "for the children".  In 15 years kids won't know what the phrase "it's all about the Benjamins" means any more than kids today know what they phrase "you sound like a broken record" means.

 

greenskeeper carl's picture

ya, and "you sound like an itunes download whose internet connection was interupted" just doesn't have the same ring to it.

RaceToTheBottom's picture

I guess laudering was more important to the Euro when it first came out.  

SILVERGEDDON's picture

Estee Lauder did cheap department store cosmetics. even I know that much.

I don't think it had fuck all to do with the euro..........................

One And Only's picture

And than what? Ban gold? Diamonds? Saphires? Or whatever people replace it with?

http://www.zerohedge.com/news/2016-02-11/lines-around-block-buy-gold-lon...

Ridiculous. They really want to suicide themselves and destroy the entire system.

NoDebt's picture

Yes, yes, yes, yes.  And... correct.

I think that about covers it.

One And Only's picture

Not tally sticks or Club Med beads. Don't you fucking touch them.

NoDebt's picture

I kind of like your idea of using beads.  It's got a certain irony to it.  Maybe the Injuns will be able to buy back Manhattan finally.

Jump The Shark's picture

https://www.bitgold.com/
Don't junk it till you look at it
I was skeptical but it really is an interesting idea.
It's not Bitcoin

Jump The Shark's picture

And I've always thought they would eventually "unlegal tender" the older Benjamin's and go with the new. I wonder what percentage of those still exist.

Canadian Renegade's picture

Well they want to but I doubt it would be so.easy. Anyone stacking to protect themselves from currency devaluation isn't just going to hand the PM's over for digits in an account earning negative interest.

I feel like there is an opportunity for phone apps that help match barter transactions. I don't have the ability but I think it's doable. Transactions could be conducted off-line to avoid being tracked and taxable. Developers could be rewarded with small annual fees for every user rather then a cut of the transaction.

WillyGroper's picture

phone apps...

that's it.

cuz they're not accessible or traced.

amirite?

flaunt's picture

Pretty sure it's easier to hide an ounce gold coin than 2 or 3 euro notes it takes to buy one.  I wonder if the US government will switch to bitcoin for funneling money to terrorists going forward? 

lincolnsteffens's picture

Do you think I could use bitcoin to buy my very own tank and have it delivered without any one noticing? That would be so cool to be the first one on my block to have my very own bug out tank to escape the SHTF in my neighborhood.

PoasterToaster's picture

"...competent authorities..."

This here phrase is their PR problem in a nutshell.  People don't believe these things exist anymore.

NoDebt's picture

Get rid of all the large demoniation bills and THEN kick in the 1800% hyperinflation.

Just thinking out loud here.

matermaker's picture

I've been saying this for a while.  COINS.   Trade happens as long as two people live next to each other.  You're not going to be buying a dozen eggs with gold or silver coins.  If the worst case scenario were to happen, trade will happen[at least initially] with good ole fashioned American coins.  Humans have used seashells, in the past.  The only real mandate for a currency is its scarcity or inability to be conjured up out of thin air.

scintillator9's picture

Fortunatley, no one notices that the wheels are coming off the burning bus.......

Twee Surgeon's picture

The total value of the 500's in circulation is 306.8 billion.

Janet K.Yellen's vaguest prognostications have more effect on the markets. They are showing signs of utter desperation, or they just want to grab every last drop, next up is the Pennies in your sock drawer act of 2016.

SmedleyButlersGhost's picture

"MS says that 80% of people that withdrew their deposits from the banking system in recent months have not returned them..."

WTF "returned them?" What, a guy's own money is a "return" to a bank like it's a used bottle going back to the owner? There you have it - upside down. According to MS a deposit is the banks and you should really not take your money but "return" it. Maybe I'm missing something but their terminology speaks volumes about where they're coming from. What a bunch of fuks.

East Indian's picture

It is the terminology of the erstwhile Communists - that all wealth belonged to the government, and the government may bestow it on whomsoever it likes... funny, US still calls itself capitalistic.