Larry Summers, former Treasury Secretary and Obama economic adviser, is pushing for an end to the $100 bill. His reason — to prevent crime. Summers is so concerned with the subject, he wrote an op-ed for the Washington Post. Although the link between crime and high-denomination bills that Summers cites exists, for the poor and paranoid, losing the $100 might be a difficult burden to bear.
Larry Summers started his argument by citing the work of Harvard Senior Fellow Peter Sands, who wrote a paper on the subject. His emphasis was not just on the $100 bill but other high-denomination bills like the €500 Euro (nicknamed the “Bin Laden” for its ties to illicit activity and roughly six times the value of the $100).
The former treasury secretary argued that crime is naturally facilitated by high-denomination bills, because they are not only untraceable, but they are light-weight as well.
“He [Sands] is surely right that illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds as would be the case if the $20 bill was the high denomination note. And he is equally correct in arguing that technology is obviating whatever need there may ever have been for high denomination notes in legal commerce.”
Summers explained that when policy makings were first talking about the Euro currency, he said that a €500 bill would invite money laundering, tax evasion, and other illicit activities. At the time Germany was insistent that the continent have a large denomination bill, so it was printed.
Now, Europe is warming to the idea of dumping the €500 according to Larry Summers, and there is a growing possibility for both sides of the Atlantic, America and Europe, to agree to eliminate high-denomination bills in a G-20 meeting. He names Luxembourg as the biggest holdout, accusing the tiny country of having a “long and unsavory tradition of giving comfort to tax evaders, money launderers, and other proponents of bank secrecy.”
Larry Summers admits that there are limits to what can be done in the current global political climate, but that by eliminating the $100 bill and other big bills, they could make a contribution to global security, while minimizing the impact on “legitimate commerce or on government budgets.”
Or as Summers put it, “It may not be a free lunch, but it is a very cheap lunch.”
Cheap is a subjective term though. His policy idea could hurt a growing portion of Americans — the poor.
As the Economist pointed out last year, life is expensive on the bottom rung of the ladder. About 8 percent of Americans don’t have a checking account, most claiming that annual fees are too much. Many have to make pay large expenses with money orders, both an inconvenience and an additional expense.
One man the Economist discussed said he would prefer to spend nights on the street carrying hundreds of dollars, the result of missing the post office hours to buy a money order, rather than pay an overdraft fee for his bank account. He said the charge “would kill me.” Most people in this situation pay in cash whenever possible, even for large expenses.
Larry Summers isn’t advocating the end of the paper money people living on the bare minimum need to avoid costs, but the same inconvenience he proposes for terrorists would also hit them (albeit they won’t be carrying 50 pounds of $20 bills).
Summers also stops short of saying the government should stop accepting all $100 bills as real currency. Instead, he says they should no longer be printed, and run out of circulation naturally.
Still, getting rid of the $100 and other large-denomination bills might not be a bad idea for giving criminals a headache, but it’d be an even better idea if it came with policies to prevent the same inconvenience for less fortunate people.
[Photo by Chung Sung-Jun/Getty Images]