Removing the $100 From Circulation
Harvard University economics professor Kenneth Rogoff advocates for withdrawing the 100-dollar bank note denomination.
Bank note use in circulation has remained relatively unchanged in recent years. According to the Federal Reserve Bank, about 60 percent of financial transactions are made using a debit or credit card. Cash is the third most popular method of payment in the United States.
Harvard University economics professor Kenneth Rogoff advocates for withdrawing the 100-dollar bank note denomination. Rogoff, who is also a chess Grandmaster, crunched some numbers and has concluded that although more than half of our 100-dollar bank notes are held overseas, there were still sufficient “C” notes available in 2022 for every American to have 55 of them in their wallets. Rogoff argues that most 100-dollar notes are used for illicit purposes and the global underground economy. He sees all fiat paper money as crippling monetary policy.
Our 100-dollar is a curiosity. We know it is a target of counterfeiters. North Korea is known to have produced “super note” 100-dollar bills. According to Adcock Solutions, the ‘denomination effect’ is a “cognitive bias relating to currency, suggesting people are less likely to spend larger currency denominations than their same value in smaller denominations.”
Kelley School of Business (at Indiana University) Assistant Professor of Marketing Helen Colby studied this effect, concluding that college students are less willing to purchase items when given a 100-dollar bill than five $20s. According to Colby, “If you spend money on a credit card, you get that same card back after the transaction. Spending a 100-dollar bill essentially destroys it.” Our 100-dollar bank notes survive for more than a decade in circulation, while our two lowest denominations in general use (1- and 5-, not the 2-dollar) wear out within 18 months. Maybe we should consider going in the other direction—reviving the 500-dollar bank note.
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