The War On Paper Currency Officially Begins: ECB Ends Production Of €500 Bill

Tyler Durden's picture

Following the denial in February that this action is in any way about reducing cash, The ECB has made its decision on the EUR500 Bill:

  • *ECB ENDS PRODUCTION AND ISSUANCE OF €500 BANKNOTE
  • *ECB SAYS ISSUANCE OF EU500 NOTE TO STOP AROUND THE END OF 2018
  • *ECB SAYS OTHER EURO BANKNOTES WILL STAY IN PLACE
  • *ECB: EU500 CAN BE EXCHANGED AT CEN BANKS FOR UNLIMITED TIME

And just like that the second highest denominated European bank note in circulation (after the CHF1000 Bill) is dead...

And so now, everyone rushes into the CHF 1000 note.

 

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

As we wrote previously, the answer is not that simple at all. Recall that 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 shown in this BofA chart:

 

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

 

This is what we said in February:

 
 

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 drug 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).

That's not all: as Bank of America pointed out, abolishing the €500 note may even end up even weakening the European currency:

 
 

... 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.

BofA is right, unless of course, in this global race to the bottom where every central bank tit has other central bank tats as a direct response, first the SNB "scraps" the CHF1000 bill, and then the Federal Reserve follows suit and listens to Harvard "scholar" and former Standard Chartered CEO Peter Sands who just last week said the US should ban the $100 note as it would "deter tax evasion, financial crime, terrorism and corruption."

 

Go ahead and cut, then: after all who really needs the Benjamins, right? Well, here's the thing:

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

As the Treasury chart above shows, $100 bills account for for $1.08 trillion of the $1.38 trillion total in circulation. So should the Fed react to the ECB's "scrapping" of the €500 bill, which accounts for 30% of the value of currency in circulation, then the Fed would respond in kind, by eliminating 78% of all paper currency in circulation by value.

Not a bad way to launch a global ban on paper currency ahead of a global NIRP regime, and all, of course, in the name of fighting "tax evasion, financial crime, terrorism and corruption."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
DogeCoin's picture

Got gold n silver bitches?

Haus-Targaryen's picture

Fuck you Draghi!  

Short the €, stock up on physical AG and AU.  

Pladizow's picture

Meanwhile the gold bugs yell about a dollar collapse!

Boris Alatovkrap's picture

Pave way to cashless society where citizenry is abject slave of collusive partnership of State and Bankster class.

froze25's picture

OK folks they are going full retard keep your powder dry.

Ignatius's picture

The battle is against the banks whose minions conjure these dipshit policies on their behalf.  Banker rule must end.

Andrew Jackson:  "I killed the bank." 

And now they are dutifully trying to eliminate the memory of Jackson.

robertsgt40's picture

Gonna need a bigger wheelbarrow Butch

ParkAveFlasher's picture

Instant currency demand, and POOF!  Prosperity!

Mountainview's picture

Would someone mind to start minting  gold coins? Russia maybe?

Manthong's picture

It’s a shame they don’t sell much ammo over there.

It is going to appreciate greatly.

Except in MENA where the dark forces make it available for free.

 

zeronetwork's picture

We can't do that. Firstly CIA and drugs second unlimited none stop printing. When and sooner than you know inflation will hit and a hundred dollar bill will buy meager lunch for two.

Beowulf55's picture

Just start another BCCI.  I'm sure they will be happy to have you launder your money using their debit cards... for a fee.

D Nyle's picture

Damn, if this keeps up, fiat will replace my toliet paper smuggling business

Gold Pedant's picture

Wouldn't you rather have the collusive partnership of State and Bankster class over this antiquated, financial instrument of terrorism, comrade? You may want to rethink your thoughts before you offend someone.

PTR's picture

Ongoing since the Rothchilds said "let's give banking a shot."

Gold Pedant's picture

Whoever downvoted you should go suck a tailpipe.

Boris Alatovkrap's picture

This is remind Boris of stupid terrorist. Leader of cell is tell low IQ terrorist "go blow up car" and he is burn lip on tailpipe.

Garbatrage's picture

So the War on Cash is aiming to eliminate all the high denominations, while simultaneously inflating the currency so smaller bills and coins become increasingly worthless, thus eliminating the feasibility of carrying cash even faster.

Haus-Targaryen's picture

IF you can look past the evil, the central planners are actually quite brilliant.

Garbatrage's picture

Indeed. I often find myself objectively thinking about how cunning all of the geopolitical, economic, and financial rackets they create are. To pull it off, one must be highly intelligent and have an extreme deficit of sympathy, empathy, and regret. I think most of them actually thrive off of schadenfreude. Other peoples' misfortune isn't a side-effect; it's intentional. It's such a shitty thing to do, but a lot of what they do really just boils down to basic animal instinct.

ParkAveFlasher's picture

The devil is not very smart, he is just very old.

holgerdanske's picture

You don't get old if you are not smart, somehow.

Ask any old biker!!

ParkAveFlasher's picture

The curse is to grow no wiser with age.

Canadian Renegade's picture

I know lots of people that seem to be afflicted by that.

zeronetwork's picture

Imagine It will be really funny when people carry banana in their pockets for barter.

tenpanhandle's picture

Are you going shopping or are you just happy to see me?

zeronetwork's picture

Its the nature they are trying to fight with and at the end they call it halocast

ZH Snob's picture

how ironic is it that feds want to now disavow and criminalize their very own paper?

Kaiser Sousa's picture

good thing i never bought any physical Gold and Silver...

 

 

hilarious....til it aint ...right sheeple.

Winston Churchill's picture

Just like the guns I don't have,the PMs I don;t have never left an official paper trail, or it was so convoluted that

nobody would know where to start looking.Being a multinational has certain advantages.

A well earned (bugged by a biz partner back in my 20s)mild paranoia helped as well.

Hope you aren't ;eaving a trail of crumbs for the looters there Kaiser..

Kaiser Sousa's picture

not squeeky clean...

but i aint conerned...

lets just say i got multiple area codes....

and plenty of G A T' S...

ps: hoe did u like how the final slam on the phony paper prices of Gold & Silver on the fucking Crimex coincided with the release of this story.....

http://www.livecharts.co.uk/MarketCharts/silver.php

http://www.livecharts.co.uk/MarketCharts/gold.php

FreeShitter's picture

Im just glad trump is going to make america great again, at least that is what he tells me.

debtor of last resort's picture

Keep stacking. No, not €500 or $100 bills.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) debtor of last resort May 4, 2016 12:27 PM

Who has used a €500 that was not conducting illegal activity?  Anyone want to raise their hand?  Didn't think so - ECB

debtor of last resort's picture

I helped a bunch of rapefugees crossing the mediteranian for a few €500 bills. That's not illegal.

OverTheHedge's picture

€500 notes frighten the willies out of me: no-one except banks are willing to accept them, and what do you do if the bank claims that your note is counterfeit?

It is far too much to risk in one little bit of paper.

Which is just how I feel about my bank book, too.

debtor of last resort's picture

That's just sentiment. It will change as soon as capital controls become visible for a larger public.

_SILENCER's picture

Well, down the road, after the carcasses are charred and the people are eating out of ditches, we'll barter for everything.

Then someone will have the bright idea about substituting paper notes for assets, and the process will start again.

xrxs's picture

I'm getting in on the ground floor this time.

Byte Me's picture

So the €CB will provide - or authorize the provision of - what - for day to day liquidity?

Theonewhoknows's picture
Theonewhoknows (not verified) Byte Me May 4, 2016 11:57 AM

Mario will be able to have this one on his CV when he attempts to get Lagarde's job oh and he did a good introducing new policies http://independenttrader.org/the-madness-of-the-ecb.html

Bill of Rights's picture

See kids this is what they called currency back then, go fetch your coloring book and crayons and we'll make some currency together.,

Latitude25's picture

Go ahead and eliminate all paper money.  Gold and silver will be king.

Tachyon5321's picture

Buy the American $100 bill and stop the haircut the Euro banks are planning on

Jim in MN's picture

I blame Al Gore. 

 

If he hadn't invented the mystical system of tubes known as the Interwebz, digital theft, er, money, would be impractical.