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EU to Follow the US's Example by Abolishing the 500-euro Bill?

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02/12/2016

Bloomberg Reports

EU finance ministers vowed at a meeting in Brussels on Friday to crack down on “illicit cash movements.” They urged the European Commission, the EU’s executive arm, to “explore the need for appropriate restrictions on cash payments exceeding certain thresholds and to engage with the European Central Bank to consider appropriate measures regarding high denomination notes, in particular the 500-euro note.”

Interestingly, in this respect, the European Commission is actually less bad than the US government. The EU apparently still uses 500-euro notes, whereas the US abolished its $500 and $1,000 notes back in the 1930s. At the time, a $100 bill could buy a whole lot of stuff, but inflation has slashed the value of a $100 which will now buy you what a $5 bill bought you in the 30s.   
 
Nevertheless, as The Atlantic discusses here, the physical $100 bill, which now constitutes 80 percent of all US currency,  has become a staple for those who wish to hold cash as a back-up in case of emergency and as a hedge, internationally, against the devaluation of other currencies. From the Keynesian point of view, this is "hoarding," and from a central bank's point of view, people having this stash of physical cash for any reason is a bad thing. 
 
So, look for the $100 bill to be targeted as well. It is unlikely, though, that physical cash wil be abolished in its entirety. We are likely to still be allowed five dollar bills for some miscellaneous purchases. The state doesn't care much about that.  The real problem from the central banker's perspective, is the ability to actually hold meaningful amounts of physical cash in personal reserves, and it wil be their goal to make that as inconvenient, costly, and cumbersome as possible. 

 

Ryan McMaken (@ryanmcmaken) is the editor of Mises Wire and The Austrian. Send him your article submissions, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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