Fighting crime with small banknotes
Rogoff’s idea is that by removing large denomination bills from circulation, circumnavigating the law would become much harder for cash-fuelled criminal enterprises like drug-dealing, corruption and human trafficking that rely on untraceable, universally accepted paper money.
“The big bills are just a lot easier to hoard, hide, store, conceal, count, and carry,” says Rogoff. “A million dollars in $100 bills fits into a briefcase, and weighs only 22 pounds. With $10 bills, you would need full-size suitcase to cram in a million dollars and it would weigh 220 pounds. The big bills are a tremendous convenience for large-scale criminal enterprises, but unimportant for most ordinary retail transactions. Breaking Bad captured the issues rather well.”
“Most people don’t realise the sheer scale of currency outstanding,” says Rogoff, “over $4200 for every man, woman and child in the United States, with 80% in 100 dollar bills. The vast bulk is unaccounted for; it is not in cash registers or bank vaults.”
Removing large bills from circulation would not only create major logistical problems for inhabitants of the criminal underworld, but also for white-collar tax evaders and unscrupulous bosses. “Without paper currency, it would be vastly more difficult for employers to pay workers off the books, and sub-market wages. It would be more difficult for employers to avoid making social security tax contributions and to skirt labour laws.”
The idea that there is such a simple (albeit presumably partial) solution to a wide variety of complex problems is an extremely tantalising one, sounding like a sort of economic butterfly effect. And it points to issues that are relevant to legitimate business transactions as well.
The orchestration of any large payment (or, even, currency exchange) can be made extremely stressful by both the quantities of money involved and the lack of transparency exhibited by the institutions executing them. Fortunately, fintech is allowing the developments of more simple, transparent solutions to daunting financial manoeuvres.
In the same way that Rogoff advocates the removal of big bills from the economy, we advocate the removal of banks and brokers from the currency exchange and foreign payments process. Through our straightforward, easy-to-use FX platform, businesses and individuals can evade the confusion, unaccountability and exploitation that are rife among the opaque institutions that facilitate international payments and exchanges.
Sometimes complicated problems can be solved simply.