Paper Money

Forbes writer pans idea of banning high-value notes

Forbes magazine contributing columnist Tim Worstall has an unconventional take on the recent uproar over discontinuing the printing of high-value bank notes. In a column titled “If Most 500 Euro Bills Are In Russia Then It Shouldn’t Be Scrapped.” His rationale, which would also apply to the $100 Federal Reserve note, is that producing them is just about pure profit for the entity that issues them.

Worstall’s explanation involves “seigniorage,” the profit made by the bank in printing money. He says “Take ten cents of ink, ten cents of high quality paper and you can then sell that newly printed note for 500 euros. That’s a pretty good profit percentage there.” 

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He mentions that any note that goes abroad and stays abroad is pure profit, and that therefore printing high-denomination euros for use in Russia is one of the most profitable businesses on the continent. 

As for the United States, the author says that seigniorage profits to the federal government for overseas circulation is estimated to be about $20 billion a year, but he gives no basis for this estimate, and as much as 90 to 95 percent of the printing of U.S. paper currency today is for replacement of withdrawn notes and not an increase of the money supply. 

The annual production reports for $100 notes from the Bureau of Engraving and Printing show 3,027,200,000 made in fiscal year 2012, 4,428,800,000 in 2013 and 640,000,000 in 2014. From 2007 through 2011 the average was 1.34 billion notes annually.

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