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There are now more $100 bills than $1 bills in circulation (and we're not sure why)

Aarthi Swaminathan
Finance Writer

If cash is king, then the $100 bill takes the throne.

The number of $100 notes out there in the world — old and new — has doubled since the financial crisis.

Source: Deutsche Bank

The trend — which Deutsche Bank’s Torsten Slok pointed out — meant that as of December 2018, there are now officially more $100 bills than $1 bills circulating.

Source: Deutsche Bank

A puzzling phenomenon

Researchers at the Federal Reserve of Boston found that the gap between the $100 and $1 notes has been widening for several decades now, with the value of $100 bills shipped by the Fed to depository institutions steadily climbing.

More than three-fourths of the total value is in $100 bills.

The phenomenon is puzzling: The U.S. Treasury Department generally prints new currency to either replace destroyed bills or meet increased demand from the public. However, Slok notes, “the stock of $100 bills outstanding is probably not driven by transaction needs given the average life span of a $100 note is much longer than for other notes.”

Furthermore, the average consumer doesn’t usually carry $100 bills. According to a 2017 survey by the Federal Reserve Bank of Atlanta, U.S. consumers held on average of $58.90 in cash each day, and the most common denomination was $1.

Source: Atlanta Fed


Most of the $100 bills are overseas

When asked, Slok offered a few potential explanations as to why the largest denomination in U.S. currency was dominating the money market.

Slok said it could be “driven by a global fear of negative interest rates in Europe and Japan,” and that consumers, businesses and governments were holding on to the safe-haven dollar in cash.

A worker inspects a sheet of money during the phase of production where the new 100 USD bills are applied with a serial number, a US Federal Reserve seal, are cut and stacked at the US Bureau of Engraving and Printing's Western Currency Facility October 11, 2013 in Fort Worth, Texas. (Photo: BRENDAN SMIALOWSKI/AFP/Getty)

The majority of $100 notes in circulation wasn’t even held by Americans, with 65% of the bills being held abroad as of 2011, according to a study by Federal Reserve economist Ruth Judson.

Source: Judson

At the same time, Slok hypothesized that $100s “could be a savings vehicle for U.S. households worried about another financial crisis.”

The plot to kill the $100 bill

Slok’s third possible explanation — one that has left many economists and policymakers over the years calling for the end of the $100 bill — is that the rise in number of $100 bills could be “driven by more demand from the global underground economy.”

A U.S. $100 bill sits on a stack of currency in this arranged photograph in Washington, D.C., U.S., on Thursday, Feb. 6, 2014. (Andrew Harrer/Bloomberg via Getty Images)

Harvard economist Kenneth Rogoff suggested killing the $100 bill, warning that paper currency “facilitates making transactions anonymous,” helping people evade laws, regulations, and taxes.

Former New York Mayor Edward Koch also wanted to kill it, as did former Treasury Secretary Larry Summers.

But for now, the $100 bill rules for another day.

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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