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.
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.
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.
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.
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.
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.”
Harvard economist Kenneth Rogoff suggested killing the $100 bill, warning that paper currency “facilitates making transactions anonymous,” helping people evade laws, regulations, and taxes.
But for now, the $100 bill rules for another day.
Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.