The Treasury Department has announced a new $100 bill, ain’t it perty?

Who uses cash anymore? Aside from the random cup of coffee or paying someone back for a purchase made together, I never use cash. I hate to carry it. And I hate to use it. I much prefer the emotional distancing I get from using a credit card. So do most of you. But, our cash is very important to many people still, and most of them don’t even live in this country. The United States dollar enjoys the status as the closest thing to a world currency. As such, a number of businesses all over the globe prefer to do business in our dollar. The size of the firms vary, but a number of transaction happen in actual exchanges of currency. This is why the largest US bill in circulation is also the most important, the $100 bill. Fed Chair Ben Bernanke estimates at least 2/3 of all $100 bills in circulation are circulating outside of the US.

Not only is it important to legitimate business, it’s also very popular in black and gray market business. But its especially popular among counterfeiters. If you could clone a $1 bill or a $100 bill, which would you choose? It would take you 100x as long to get as much money in singles as it would in hundreds. Plus no one wants to get paid in singles and it could prompt questions about the currency. Interestingly, the $20 bill is the most common counterfeit currency inside the US. Perhaps because it’s used to buy more consumer goods whereas outside the US for larger purchases? Maybe.

But why should a country really care if their currency is counterfeited? I mean if some Russian mobsters want to sell some guns to the Yakuza in Japan and the Yakuza uses counterfeit dollars to pay, we should probably encourage that right? That kind of mistrust would do wonders for reducing crime around the world.

True, but what would the Russians do with that money once they got it? Let’s pretend they decide to go spend it on groceries, buying American cars, or even American guns. This money is now being put into circulation. What happens when you put more money into circulation? Inflation. Now that’s ok sometimes, but inflation is kind of The Fed’s thing and they don’t want anyone trampling on their territory.

But the bigger concern goes back to the US dollar being the currency of choice in many places around the globe. If we don’t make sure the currency people receive is actual legal tender, then people will start to lose trust in our dollar. So the Treasury Department has designed a new $100 bill that gets us one step ahead of the counterfeiters. Unfortunately, it will only be one step, and it probably won’t take long for the counterfeiters to make a decent copy. Like all security systems, it doesn’t take long for the competition to catch up. It’s why we develop more military weapons, get new bills, and have to update our anti-virus every friggin week (damnit AVG I’ll restart my comp when I’m good and ready!).

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categories: economics, government