A few days ago, The Wall Street Journal (one of the most famous American business newspapers) published an interesting article on how to cause the greatest damage to the Russian economy, and although the main idea of \u200b\u200bthis article about the need to ban the circulation of $100 bills may now seem like science fiction, however recent events in the world show that in the near future there is a possibility that this may turn out to be a reality.
Ending the $100 bill would put far more political pressure on Vladimir Putin than earlier sanctions on Russia, the Wall Street Journal argues, because most Russians haven't been hit by Western sanctions, but there's one thing the US Treasury Department can to do in order to put real political pressure on Vladimir Putin is to immediately stop the circulation and payment of 100-dollar bills in Russia.
Instead of investing in a pension fund, both ordinary and wealthy Russians protect their savings by converting their rubles into dollars and hiding them at home. In recent years, the volatility of the Russian ruble and the security and stability of the US dollar have made the US currency the preferred savings mechanism. For years, Russians preferred to keep dollars in $100 bills. As of 2019, there were over 661,500 pounds of $100 bills in Russia, for a total of $31.5 billion.
According to The Wall Street Journal, millions of Russians were alarmed in 1996 when Washington redesigned the $100 bill to make it harder to counterfeit. Russians, accustomed to drastic currency reforms, are worried that their saved dollars are suddenly worthless, and fewer people are accepting the obsolete currency. In those days, Russians had more US dollars than any other foreign currency, and 80% of those dollars were 100 dollar bills. Although the US Treasury Department has not officially recalled the existing $100 bills, many Russian commercial bankers have warned that they will likely discard the old version or charge a fee to replace them.
While sanctions have failed to sway Vladimir Putin, in part because they have little effect on the well-being of most Russians, a quick repeal of the $100 could spark a real backlash at home, as The Wall Street Journal points out. In the current Russian banking environment, there would be no easy way to convert these banknotes into another currency, and Russians' savings would turn into paper.
According to The Wall Street Journal journalist, it would even be nice to give up $100 worldwide. Nearly 80% of US $100 bills are held overseas, and many of these are fueling unscrupulous individuals. As former US Treasury Secretary Larry Summers argued, easy-to-transport cash is the key to global corruption and crime. Large Western banknotes like the $100 are what terrorists and drug dealers use to do most of their trade. Getting rid of large denominations of currency—just as the US stopped issuing $500, $1,000, and $5,000 notes in 1969—will also hurt authoritarian regimes like North Korea by depriving them of an easy way to launder ill-gotten gains.
Research shows that in the US, ditching the $100 bill can help reduce tax evasion and commercial theft, as well as employee theft. Even opening up a political debate in the US about abolishing the $100 bill would stir things up in Russia, Iran, and Venezuela, which in itself could be more politically disruptive than many sanctions.