WEBVTT - 37: The International Plot to Kill Big Bills

0:00:00.040 --> 0:00:04.920
<v Speaker 1>There are thirty three hundred dollar bills for every man, woman,

0:00:04.960 --> 0:00:08.800
<v Speaker 1>and child in the US, So if you've only got one,

0:00:09.640 --> 0:00:21.720
<v Speaker 1>somebody else has your other two. Hi, and welcome back

0:00:21.720 --> 0:00:24.439
<v Speaker 1>to Bloomberg Benchmark, a show about the inner workings of

0:00:24.520 --> 0:00:27.600
<v Speaker 1>the global economy. I'm Tory Stillwell and economics reporter for

0:00:27.600 --> 0:00:30.560
<v Speaker 1>Bloomberg News in d C. And I'm joined by my

0:00:30.640 --> 0:00:34.840
<v Speaker 1>co host Akido, our Benchmark editor in San Francisco. Hey Hockey,

0:00:35.200 --> 0:00:38.239
<v Speaker 1>Hey Tony, how's it going pretty good? I am recording

0:00:38.280 --> 0:00:41.240
<v Speaker 1>today out of our newsroom, so you may hear a

0:00:41.280 --> 0:00:45.520
<v Speaker 1>little bit of background noise. Oh well, I'm recording from

0:00:45.560 --> 0:00:49.479
<v Speaker 1>San Francisco for the first time in I think four months.

0:00:49.560 --> 0:00:53.920
<v Speaker 1>Oh wow. Yeah, welcome back, and it's good to be back. Yeah,

0:00:54.000 --> 0:00:57.880
<v Speaker 1>thank you so much. Well, today's show is all about

0:00:58.200 --> 0:01:04.559
<v Speaker 1>Dolla dolla bills, y'all, Dolla dollar bills. Yeahs. But the

0:01:04.640 --> 0:01:08.200
<v Speaker 1>European Central Bank last week said it would stop producing

0:01:08.200 --> 0:01:13.400
<v Speaker 1>their five hundred euro bank notes after citing concerns that

0:01:13.480 --> 0:01:19.199
<v Speaker 1>it could facilitate illicit activities some criminals. Actually, they refer

0:01:19.360 --> 0:01:22.520
<v Speaker 1>to this note as the bin laden, referring to the

0:01:23.680 --> 0:01:30.080
<v Speaker 1>I was just I wrote that in my notes isn't

0:01:30.120 --> 0:01:32.640
<v Speaker 1>that so interesting? I mean, I feel like that says

0:01:32.640 --> 0:01:37.199
<v Speaker 1>a lot about this. That's the former leader of al Qaeda.

0:01:37.360 --> 0:01:39.400
<v Speaker 1>For all of our listeners out there, I don't I

0:01:39.400 --> 0:01:41.200
<v Speaker 1>don't know how you wouldn't know who' been latin this,

0:01:41.360 --> 0:01:46.440
<v Speaker 1>But in case you don't, yeah, good context. Well anyway,

0:01:46.480 --> 0:01:50.560
<v Speaker 1>that decision has been fairly controversial. And you know, Germany,

0:01:50.640 --> 0:01:54.680
<v Speaker 1>since apparently before even the creation of the Eurozone, has

0:01:54.760 --> 0:01:58.600
<v Speaker 1>been a big proponent of high denomination notes, and the

0:01:58.600 --> 0:02:01.560
<v Speaker 1>head of the country's central bank just recently said that

0:02:01.600 --> 0:02:05.680
<v Speaker 1>it's still debatable whether the removal of the five year

0:02:05.680 --> 0:02:09.120
<v Speaker 1>old note is going to curtail any crime, and that

0:02:09.240 --> 0:02:13.040
<v Speaker 1>it actually might end up undermining people's trust in cash.

0:02:13.120 --> 0:02:17.480
<v Speaker 1>And apparently officials in Austria and also Switzerland are against

0:02:17.520 --> 0:02:21.440
<v Speaker 1>eliminating their own forms of high denomination money too. So

0:02:21.560 --> 0:02:24.679
<v Speaker 1>to discuss all of this and more, we have enlisted

0:02:24.760 --> 0:02:28.480
<v Speaker 1>Peter Sands, whose paper called making It Harder for the

0:02:28.560 --> 0:02:31.840
<v Speaker 1>Bad Guys has helped fuel this debate. He's a senior

0:02:31.880 --> 0:02:34.760
<v Speaker 1>fellow at the Harvard Kennedy School, and before that, he

0:02:34.880 --> 0:02:38.320
<v Speaker 1>was CEO of Standard Chartered Bank for almost ten years.

0:02:38.639 --> 0:02:43.079
<v Speaker 1>Welcome Peter high So Peter, as the head of a bank,

0:02:43.440 --> 0:02:46.000
<v Speaker 1>I'm sure that you've seen your fair share of high

0:02:46.080 --> 0:02:52.120
<v Speaker 1>denomination notes, right. Actually, cash doesn't play much role in

0:02:53.040 --> 0:02:55.960
<v Speaker 1>modern banking. I mean, obviously you take it out of

0:02:56.000 --> 0:02:59.600
<v Speaker 1>a t m S and people deposited in branches, but

0:02:59.680 --> 0:03:02.800
<v Speaker 1>most of what a bank does doesn't actually involve cash.

0:03:03.160 --> 0:03:04.640
<v Speaker 1>So in a lot of ways, this was kind of

0:03:04.680 --> 0:03:09.120
<v Speaker 1>a foreign world to you. Well, certainly, the rather murky

0:03:09.200 --> 0:03:13.880
<v Speaker 1>world of people trying to move money across borders in

0:03:14.800 --> 0:03:17.359
<v Speaker 1>sort of piles of high denomination notes was not something

0:03:17.440 --> 0:03:24.000
<v Speaker 1>I've come across. You're not an international criminals, Peter. Maybe

0:03:24.000 --> 0:03:26.760
<v Speaker 1>you could walk us through a summary of your research

0:03:26.800 --> 0:03:29.360
<v Speaker 1>for our listeners and then we can dig through some

0:03:29.400 --> 0:03:34.120
<v Speaker 1>of the details afterwards. The my interest in high denomination

0:03:34.200 --> 0:03:39.840
<v Speaker 1>notes is because they aren't used very much in everyday life.

0:03:39.960 --> 0:03:44.200
<v Speaker 1>We don't normally take a five hundred dollar five euro

0:03:44.360 --> 0:03:47.240
<v Speaker 1>note out of our pocket and try and buy a

0:03:47.240 --> 0:03:51.240
<v Speaker 1>coffee with it. But if you look at what criminals

0:03:51.240 --> 0:03:55.720
<v Speaker 1>are doing, drug traffickers, people financing terrorism, people giving all

0:03:55.760 --> 0:04:00.640
<v Speaker 1>receiving bribes, actually they're using these notes very intensely. So

0:04:00.720 --> 0:04:04.120
<v Speaker 1>the point of my research was to look at whether

0:04:04.240 --> 0:04:06.920
<v Speaker 1>or not we should still be issuing these or whether

0:04:06.960 --> 0:04:09.760
<v Speaker 1>we should get rid of them, not because it would

0:04:09.760 --> 0:04:13.680
<v Speaker 1>suddenly stop criminal activity, but it would simply, as the

0:04:13.720 --> 0:04:16.359
<v Speaker 1>title of the paper put it, make the lives of

0:04:16.400 --> 0:04:19.600
<v Speaker 1>the bad guys a bit harder because the great advantage

0:04:19.800 --> 0:04:24.440
<v Speaker 1>of high denomination notes is that they are the most

0:04:25.120 --> 0:04:32.080
<v Speaker 1>anonymous and easy way to transport and store money secretly

0:04:32.320 --> 0:04:35.320
<v Speaker 1>if you if you want to do something illegal, right,

0:04:35.320 --> 0:04:40.640
<v Speaker 1>and we're talking about people who are trying to evade taxes, finance, terror, corruption,

0:04:41.480 --> 0:04:44.719
<v Speaker 1>financial crimes, those types of bad guys, I guess anybody

0:04:44.720 --> 0:04:47.920
<v Speaker 1>who wants to do something that they don't want anybody

0:04:47.960 --> 0:04:51.240
<v Speaker 1>in authority to know that they are doing. And the

0:04:51.279 --> 0:04:55.520
<v Speaker 1>great thing about cash is that cash is anonymous and

0:04:55.600 --> 0:04:59.040
<v Speaker 1>it leaves no record, and there's no other payment mechanism

0:04:59.279 --> 0:05:02.680
<v Speaker 1>that does that it. So for I guess some context

0:05:02.720 --> 0:05:06.239
<v Speaker 1>for our listeners who haven't tried to move a large

0:05:06.240 --> 0:05:10.760
<v Speaker 1>amount of money around anonymously. A million dollars worth of

0:05:10.839 --> 0:05:14.880
<v Speaker 1>twenty dollar bills apparently is about a hundred and ten pounds,

0:05:14.920 --> 0:05:18.920
<v Speaker 1>which would fit in about four briefcases. So think of

0:05:18.960 --> 0:05:23.600
<v Speaker 1>that as maybe carrying tories entire body weight around. It's

0:05:23.640 --> 0:05:27.640
<v Speaker 1>quite a lot would be able to do that one person.

0:05:28.200 --> 0:05:30.680
<v Speaker 1>I would find it pretty hard, and you certainly couldn't

0:05:30.720 --> 0:05:34.760
<v Speaker 1>do it very discreetly. Right, Yeah, But if you tried

0:05:34.760 --> 0:05:38.039
<v Speaker 1>to do that with one hundred dollar bills, that would

0:05:38.040 --> 0:05:40.680
<v Speaker 1>only be twenty two pounds and it would fit in

0:05:40.760 --> 0:05:44.360
<v Speaker 1>a single briefcase. So it's a totally new ball game. Right.

0:05:44.400 --> 0:05:46.840
<v Speaker 1>And if we look at the five hundred euro notes

0:05:46.920 --> 0:05:49.599
<v Speaker 1>that we're just announced that they're going to be phased out,

0:05:50.040 --> 0:05:53.720
<v Speaker 1>a million dollars a million US dollars that is weighs

0:05:53.800 --> 0:05:56.919
<v Speaker 1>about five pounds, and that would fit in a you know,

0:05:57.000 --> 0:05:59.400
<v Speaker 1>a very small bag. So it's a it's like you said,

0:05:59.400 --> 0:06:02.640
<v Speaker 1>it's a total game changer. Yeah, and surprise, surprise, if

0:06:02.680 --> 0:06:08.320
<v Speaker 1>you look at what cocaine smugglers are using, uh, they're

0:06:08.400 --> 0:06:11.839
<v Speaker 1>preferred is the five year note, and then after that

0:06:11.880 --> 0:06:14.200
<v Speaker 1>they quite like the hundred dollar bill. But give them

0:06:14.200 --> 0:06:17.240
<v Speaker 1>a choice, they'll use the five euro because they can

0:06:17.279 --> 0:06:21.080
<v Speaker 1>get more money in a smaller package, are less easy

0:06:21.160 --> 0:06:26.760
<v Speaker 1>to sort of find package, they can transport it more easily. Peter,

0:06:26.800 --> 0:06:29.000
<v Speaker 1>I think a lot of our listeners are hearing this,

0:06:29.040 --> 0:06:31.359
<v Speaker 1>and you know, they're thinking, like, gosh, this sounds like

0:06:31.360 --> 0:06:35.679
<v Speaker 1>a relatively easy and simple thing for governments to do. So,

0:06:35.920 --> 0:06:38.479
<v Speaker 1>you know, can we get any kind of sense on

0:06:38.600 --> 0:06:41.479
<v Speaker 1>how much of an impact maybe getting rid of the

0:06:41.520 --> 0:06:45.240
<v Speaker 1>one dollar bill would have on cutting crime, on on

0:06:45.279 --> 0:06:47.719
<v Speaker 1>how much more taxes the I R s might be

0:06:47.760 --> 0:06:50.919
<v Speaker 1>able to collect. Well, it's very difficult to get a

0:06:50.960 --> 0:06:55.320
<v Speaker 1>precise calculation, and a lot depends on how easy it

0:06:55.440 --> 0:07:01.039
<v Speaker 1>is for the criminals to find substitutes. So if, for example,

0:07:01.440 --> 0:07:03.680
<v Speaker 1>we get rid of the five hundred euro note as

0:07:04.080 --> 0:07:06.400
<v Speaker 1>as it is proposed, just to stop issuing it, but

0:07:07.120 --> 0:07:11.520
<v Speaker 1>the European Central Bank just ramps up production of the

0:07:11.560 --> 0:07:16.239
<v Speaker 1>two hundred euro note, then the impact will be less

0:07:16.240 --> 0:07:19.600
<v Speaker 1>than if it forces people, to, say, use the hundred

0:07:19.840 --> 0:07:23.360
<v Speaker 1>euro note. So it depends somewhat on sort of how

0:07:23.520 --> 0:07:27.000
<v Speaker 1>the policy is implemented. But I think we can be

0:07:27.040 --> 0:07:30.840
<v Speaker 1>pretty confident that there will be a positive impact, and

0:07:30.880 --> 0:07:34.480
<v Speaker 1>it will be most positive whether stakes are high. So

0:07:34.520 --> 0:07:37.800
<v Speaker 1>it won't make much difference if somebody is just trying

0:07:37.840 --> 0:07:40.200
<v Speaker 1>not to pay tax on a very small amount of money,

0:07:40.240 --> 0:07:43.800
<v Speaker 1>because they're probably not using higher denomination notes anyway. But

0:07:43.840 --> 0:07:47.040
<v Speaker 1>if they're trying to not pay tax by taking say

0:07:47.080 --> 0:07:50.680
<v Speaker 1>cash income um and not reporting it on tens or

0:07:50.760 --> 0:07:54.240
<v Speaker 1>hundreds of thousands of dollars, then that is more likely

0:07:54.280 --> 0:07:59.200
<v Speaker 1>to be affected by not having high denomination notes. And likewise,

0:07:59.760 --> 0:08:02.960
<v Speaker 1>you know, drug trafficking is probably the crime that involves

0:08:03.480 --> 0:08:08.320
<v Speaker 1>most cross border transportation of very large sums of money.

0:08:08.440 --> 0:08:11.880
<v Speaker 1>It's been estimated that about thirty billion dollars a year

0:08:12.280 --> 0:08:15.960
<v Speaker 1>crosses the US Mexico border in cash. You just have

0:08:16.080 --> 0:08:18.160
<v Speaker 1>to think about it very simply. If you didn't have

0:08:18.200 --> 0:08:21.480
<v Speaker 1>a hundred dollar bill and you had to carry either

0:08:21.600 --> 0:08:25.200
<v Speaker 1>fifties or twenties, you'd have two to five times as

0:08:25.280 --> 0:08:31.400
<v Speaker 1>many packages things hidden in the floors of cars, you know,

0:08:31.480 --> 0:08:34.720
<v Speaker 1>secret containers going across. So the cost of doing that

0:08:34.800 --> 0:08:40.400
<v Speaker 1>for the criminals and their risk of detection would be higher. Um.

0:08:40.440 --> 0:08:43.240
<v Speaker 1>And what's funny is people are quite reluctant when you

0:08:43.280 --> 0:08:46.640
<v Speaker 1>first suggest getting rid of these things. People are a

0:08:46.679 --> 0:08:51.320
<v Speaker 1>bit sort of anxious and you know, a bit uncertain

0:08:51.360 --> 0:08:54.040
<v Speaker 1>about it. But nobody's proposing to bring any of the

0:08:54.120 --> 0:08:57.400
<v Speaker 1>things that have been eliminated back again. Right once they're gone,

0:08:57.440 --> 0:08:59.880
<v Speaker 1>nobody wants them back again. You know that there's some

0:09:00.000 --> 0:09:02.720
<v Speaker 1>of those notes five hundred thousand dollars, five thousand dollars,

0:09:02.760 --> 0:09:06.080
<v Speaker 1>ten thousand dollar bills. They're actually all still legal tender

0:09:06.480 --> 0:09:08.920
<v Speaker 1>and there some of them are still in circulation. Just

0:09:08.960 --> 0:09:10.920
<v Speaker 1>if the FED finds them, they like gobble them up

0:09:10.960 --> 0:09:14.240
<v Speaker 1>and destroy them and take them out. Oh my god. Yeah, absolutely,

0:09:14.320 --> 0:09:19.080
<v Speaker 1>they haven't been brought back. When when was the last

0:09:19.080 --> 0:09:23.680
<v Speaker 1>time you used one hundred dollar bill? Oh gosh, um,

0:09:23.720 --> 0:09:26.840
<v Speaker 1>you know, I think I maybe took out one hundreds

0:09:26.960 --> 0:09:29.880
<v Speaker 1>when I went to Iceland a year ago. You were

0:09:29.960 --> 0:09:32.840
<v Speaker 1>traveling to Yeah, I was traveling. That's the only time

0:09:32.920 --> 0:09:36.959
<v Speaker 1>I ever take out money that big. Well, there are

0:09:37.120 --> 0:09:41.520
<v Speaker 1>thirty three ish around thirty three at least over thirty

0:09:42.320 --> 0:09:46.680
<v Speaker 1>hundred dollar bills for every man, woman, and child in

0:09:47.520 --> 0:09:51.400
<v Speaker 1>the US. So if you've only got one, somebody else

0:09:51.440 --> 0:09:57.360
<v Speaker 1>has your probably outside of the US too, right, A

0:09:57.400 --> 0:10:00.520
<v Speaker 1>lot of these bills aren't inside the country, that's right.

0:10:00.640 --> 0:10:03.680
<v Speaker 1>We don't really know how much, but it's probably over

0:10:04.640 --> 0:10:11.400
<v Speaker 1>them ah um, outside the US. Indeed, it's been suggested that, um,

0:10:11.440 --> 0:10:14.280
<v Speaker 1>the city in the world which probably has most of them,

0:10:14.400 --> 0:10:18.640
<v Speaker 1>um is probably Moscow, but again we don't know that

0:10:18.679 --> 0:10:21.120
<v Speaker 1>for certain. Well, we're going to take a short break,

0:10:21.160 --> 0:10:24.160
<v Speaker 1>but when we come back, we will talk about how

0:10:24.200 --> 0:10:28.160
<v Speaker 1>emerging markets are dealing with high denomination bills, as well

0:10:28.200 --> 0:10:32.280
<v Speaker 1>as some of the CONTs behind taking them out after

0:10:32.320 --> 0:10:49.480
<v Speaker 1>this break. So, Peter, one of the interesting points that

0:10:49.520 --> 0:10:51.600
<v Speaker 1>you make in your paper is that a lot of

0:10:51.640 --> 0:10:57.040
<v Speaker 1>these criminal transactions don't happen inside the US, inside US territory,

0:10:57.320 --> 0:11:02.760
<v Speaker 1>but they're occurring in US dollars. So when government officials

0:11:02.760 --> 0:11:06.640
<v Speaker 1>in India or say Pakistan want to fight drug track,

0:11:07.280 --> 0:11:11.600
<v Speaker 1>drug trafficking or corruption, uh, the existence of one hundred

0:11:11.640 --> 0:11:14.680
<v Speaker 1>dollar bills makes it that much harder for them to

0:11:14.760 --> 0:11:17.720
<v Speaker 1>actually fight that. UM. So I'm wondering, do you know

0:11:17.800 --> 0:11:21.640
<v Speaker 1>if any emerging market officials have urged the US have

0:11:21.800 --> 0:11:24.559
<v Speaker 1>urged US government officials to get rid of one hundred

0:11:24.640 --> 0:11:28.000
<v Speaker 1>dollar bills? And has something like this ever been on

0:11:28.080 --> 0:11:33.880
<v Speaker 1>the G twenty agenda. I don't know whether um uh

0:11:33.920 --> 0:11:38.559
<v Speaker 1>there have been specific conversations from emerging market government officials

0:11:38.720 --> 0:11:44.840
<v Speaker 1>um uh to the US. I know that UM that

0:11:45.080 --> 0:11:51.600
<v Speaker 1>emerging market sort of crime fighting officials UM are very

0:11:51.640 --> 0:11:56.160
<v Speaker 1>aware of the role let's say the hundred dollar bill plays,

0:11:56.320 --> 0:12:01.360
<v Speaker 1>whether it's in drug trafficking or corruption um or and

0:12:01.400 --> 0:12:04.280
<v Speaker 1>so on. And I would be surprised if those conversations

0:12:04.720 --> 0:12:08.720
<v Speaker 1>UM haven't been happening. Um. And I'm aware that this

0:12:09.080 --> 0:12:13.600
<v Speaker 1>discussion around the role of high denomination notes has been

0:12:13.600 --> 0:12:18.360
<v Speaker 1>discussed in various forums in the context of terrorist finance

0:12:18.640 --> 0:12:23.560
<v Speaker 1>and also in the context of corruption. Mm hmm. So

0:12:23.679 --> 0:12:27.240
<v Speaker 1>these operators of you know, global common currencies like the

0:12:27.360 --> 0:12:30.400
<v Speaker 1>US and Europe, they kind of have this global responsibility

0:12:30.480 --> 0:12:36.200
<v Speaker 1>to Yeah, I would argue we do have a global responsibility.

0:12:36.320 --> 0:12:42.439
<v Speaker 1>Most emerging markets don't actually issue high denomination notes themselves, um,

0:12:42.520 --> 0:12:45.600
<v Speaker 1>But the high denomination notes are in use in their

0:12:45.679 --> 0:12:49.520
<v Speaker 1>own economies, um, in ways that are often quite sort

0:12:49.559 --> 0:12:53.960
<v Speaker 1>of corrosive to their societies. Right, So this seems kind

0:12:53.960 --> 0:12:56.880
<v Speaker 1>of like a slam dunk to me. Why why are

0:12:56.960 --> 0:13:00.880
<v Speaker 1>some people opposed to this? Well, I'm sympathetic to the

0:13:00.960 --> 0:13:04.959
<v Speaker 1>argument that cash still plays a really important role. It's

0:13:05.000 --> 0:13:09.400
<v Speaker 1>incredibly convenient. It works when you don't have a electricity

0:13:09.480 --> 0:13:12.520
<v Speaker 1>or telephone signal. It works when you want to give

0:13:12.760 --> 0:13:15.640
<v Speaker 1>you a child pocket money. You don't need any infrastructure,

0:13:16.000 --> 0:13:20.960
<v Speaker 1>and it is private and there's real value in that. However,

0:13:21.559 --> 0:13:25.839
<v Speaker 1>that's really useful in the many small transactions we're doing

0:13:26.000 --> 0:13:29.480
<v Speaker 1>sort of every day, and the reality is we're not

0:13:29.640 --> 0:13:33.040
<v Speaker 1>using high denomination notes for it. And if you need

0:13:33.160 --> 0:13:37.559
<v Speaker 1>high denomination notes in that kind of circumstance, the evidence

0:13:37.559 --> 0:13:43.240
<v Speaker 1>would suggest that you're normally doing something which society probably

0:13:43.280 --> 0:13:45.559
<v Speaker 1>doesn't want you to do it privately, right, you're probably

0:13:45.559 --> 0:13:48.280
<v Speaker 1>being sketchy a little bit. Yeah, I mean, you know,

0:13:49.280 --> 0:13:53.280
<v Speaker 1>if you need five eur notes to make a payment, UM,

0:13:53.320 --> 0:13:58.480
<v Speaker 1>you're probably buying something or selling something in thousands or

0:13:58.559 --> 0:14:04.640
<v Speaker 1>tens of thousands or Europe. The the likelihood is that

0:14:04.679 --> 0:14:08.439
<v Speaker 1>there should be some tanks attached to that, UM, and

0:14:08.880 --> 0:14:11.839
<v Speaker 1>you know, it may be a bit of a dubious transaction.

0:14:12.000 --> 0:14:14.319
<v Speaker 1>And I know as a kid, I mean I always

0:14:14.640 --> 0:14:18.240
<v Speaker 1>personally liked it when I got my money in smaller bills,

0:14:18.320 --> 0:14:20.480
<v Speaker 1>like for gifts, because it always made me feel like

0:14:20.520 --> 0:14:25.800
<v Speaker 1>I was getting more, even though obviously I wasn't you know, Peter,

0:14:26.160 --> 0:14:30.600
<v Speaker 1>your your paper came out in February and Larry Summers,

0:14:30.680 --> 0:14:34.080
<v Speaker 1>who UM is the former Treasury secretary. He wrote a

0:14:34.160 --> 0:14:37.840
<v Speaker 1>very influential op ed about it back in your argument,

0:14:38.320 --> 0:14:42.200
<v Speaker 1>and the ECB just last week came to this decision

0:14:42.440 --> 0:14:46.480
<v Speaker 1>to stop issuing their five euro notes. Do you feel

0:14:46.520 --> 0:14:52.160
<v Speaker 1>like your argument is gaining traction in the US. Well,

0:14:52.280 --> 0:14:56.760
<v Speaker 1>it's certainly gaining traction in Europe. As you have noticed, UM,

0:14:56.800 --> 0:15:01.360
<v Speaker 1>I think UM the US has been watching to see

0:15:01.640 --> 0:15:05.840
<v Speaker 1>what Europe would do, and there's so much of it

0:15:05.920 --> 0:15:09.480
<v Speaker 1>out there. The three hundred billion euro of five hundred

0:15:09.520 --> 0:15:12.760
<v Speaker 1>euro notes, there's a trillion dollars of there's over a

0:15:12.840 --> 0:15:15.800
<v Speaker 1>trillion dollars of hundred dollar bills. But but given that

0:15:15.840 --> 0:15:19.920
<v Speaker 1>the five hundred euro note was the the obvious starting point,

0:15:20.640 --> 0:15:24.240
<v Speaker 1>that's where the attention has been focused. But I think

0:15:24.480 --> 0:15:27.480
<v Speaker 1>it is important in the US to be very thoughtful

0:15:27.480 --> 0:15:30.920
<v Speaker 1>about what the role is of the hundred dollar bill. Um.

0:15:31.360 --> 0:15:34.640
<v Speaker 1>Do you really need thirty three hundred dollar bills for

0:15:34.960 --> 0:15:40.240
<v Speaker 1>um everybody in America? It does seem it does seem

0:15:40.240 --> 0:15:44.560
<v Speaker 1>an awful lot. The Swiss particularly have been a little

0:15:44.560 --> 0:15:47.960
<v Speaker 1>opposed to this idea. You know, some of the officials

0:15:47.960 --> 0:15:50.960
<v Speaker 1>there have argued that the right to pay anonymously is

0:15:51.160 --> 0:15:55.760
<v Speaker 1>a basic liberty and that people are using, um, the

0:15:55.920 --> 0:15:59.480
<v Speaker 1>one thousand franc notes. They're arguing that there you're use

0:15:59.560 --> 0:16:02.160
<v Speaker 1>not only the means of payment but also as a

0:16:02.280 --> 0:16:05.880
<v Speaker 1>store of value. Can you explain to us exactly what

0:16:05.920 --> 0:16:08.080
<v Speaker 1>they mean by that and whether or not that's a

0:16:08.120 --> 0:16:10.720
<v Speaker 1>convincing argument Frankly, I think we should get rid of

0:16:10.760 --> 0:16:12.640
<v Speaker 1>the one. The Swiss should get rid of the one

0:16:12.680 --> 0:16:16.400
<v Speaker 1>thousand Swiss franc um no, because I suspect it's largely

0:16:16.600 --> 0:16:21.760
<v Speaker 1>used UMU to store value, but to store value which

0:16:21.840 --> 0:16:25.440
<v Speaker 1>has been illegally obtained in one way or rather through

0:16:25.480 --> 0:16:29.640
<v Speaker 1>tax evasion or some form of crime or corruption. And yes,

0:16:29.680 --> 0:16:34.600
<v Speaker 1>there maybe some people who choose to hold their savings

0:16:34.600 --> 0:16:37.760
<v Speaker 1>sort of under their bed, but A you've got to

0:16:37.800 --> 0:16:40.720
<v Speaker 1>be pretty wealthy to really need to do it in

0:16:40.880 --> 0:16:45.680
<v Speaker 1>thousand Swiss franc notes right that for it to make

0:16:45.680 --> 0:16:48.480
<v Speaker 1>a difference between doing it in the hundreds and thousands,

0:16:48.600 --> 0:16:51.640
<v Speaker 1>you've got to be storing a serious amount and be

0:16:51.720 --> 0:16:54.360
<v Speaker 1>you've got to ask the question of well, why is

0:16:54.400 --> 0:16:57.280
<v Speaker 1>it that somebody is so keen for it not to

0:16:57.360 --> 0:17:01.880
<v Speaker 1>be recorded in the banking system. And I'm wondering, Peter,

0:17:02.000 --> 0:17:04.720
<v Speaker 1>when this idea came to you in the first place.

0:17:04.760 --> 0:17:07.600
<v Speaker 1>Was it when you were running Standard Chartered or was

0:17:07.640 --> 0:17:10.280
<v Speaker 1>it a little bit later? Well, it could to me

0:17:10.480 --> 0:17:12.919
<v Speaker 1>when I was still out Standard charldhood, but um I

0:17:12.920 --> 0:17:16.680
<v Speaker 1>didn't have the time to do very much UM about

0:17:16.760 --> 0:17:20.160
<v Speaker 1>it as an idea. UM And so when I came

0:17:20.200 --> 0:17:23.159
<v Speaker 1>to Harvard. I thought, well, I should focus on this

0:17:23.200 --> 0:17:26.440
<v Speaker 1>and see whether it is such a good idea as

0:17:26.480 --> 0:17:28.840
<v Speaker 1>it sort of seemed to me to get rid of

0:17:28.880 --> 0:17:32.760
<v Speaker 1>these notes, um. And that's why I worked with a

0:17:32.800 --> 0:17:36.359
<v Speaker 1>bunch of a group of graduate students here to do

0:17:36.560 --> 0:17:40.200
<v Speaker 1>research into the different high denomination notes in the world

0:17:40.240 --> 0:17:43.679
<v Speaker 1>and also the role that these different notes played in

0:17:43.800 --> 0:17:47.960
<v Speaker 1>different forms of illicit activity. And after all that research,

0:17:48.160 --> 0:17:49.840
<v Speaker 1>it turned out to be just as good as an

0:17:49.880 --> 0:17:52.399
<v Speaker 1>idea as you thought it would be. Well, if anything,

0:17:52.440 --> 0:17:55.280
<v Speaker 1>it turned out to be a better idea, because the

0:17:55.400 --> 0:17:57.359
<v Speaker 1>more we looked at it, the more we came to

0:17:57.400 --> 0:18:00.600
<v Speaker 1>the view that really people went you seeing these notes

0:18:00.680 --> 0:18:04.439
<v Speaker 1>very much, they don't play a significant role in normal,

0:18:04.560 --> 0:18:09.280
<v Speaker 1>everyday economic activity um. And therefore the downside of getting

0:18:09.320 --> 0:18:12.119
<v Speaker 1>rid of them seems incredibly limited. And yet, on the

0:18:12.160 --> 0:18:16.119
<v Speaker 1>other hand, almost every seizure of illegal cash, be it

0:18:16.200 --> 0:18:20.520
<v Speaker 1>for corruption or drugs or whatever, involves these higher denomination notes.

0:18:20.800 --> 0:18:23.840
<v Speaker 1>So when you've got something which is being used a

0:18:23.840 --> 0:18:25.920
<v Speaker 1>lot for bad things and not being used a lot

0:18:26.000 --> 0:18:29.160
<v Speaker 1>for good things, and it is something that is produced

0:18:29.160 --> 0:18:32.680
<v Speaker 1>by the state, it's not a sort of natural thing.

0:18:32.840 --> 0:18:35.800
<v Speaker 1>It's a it's something that the government produces. You've got

0:18:35.920 --> 0:18:40.160
<v Speaker 1>to ask, why are we producing something that makes life

0:18:40.200 --> 0:18:45.080
<v Speaker 1>easier for criminals and so and and it's a very

0:18:45.119 --> 0:18:49.239
<v Speaker 1>it is actually a very easy policy to implement, and

0:18:49.320 --> 0:18:51.720
<v Speaker 1>in the world of fighting crime, most things are quite

0:18:51.760 --> 0:18:54.960
<v Speaker 1>difficult to do, whereas turning off a printer is a

0:18:55.000 --> 0:18:57.640
<v Speaker 1>pretty simple policy. Is there a chance that I mean

0:18:57.680 --> 0:18:59.880
<v Speaker 1>this would save us money or cost us for mean

0:19:00.119 --> 0:19:05.320
<v Speaker 1>terms of eliminating these bills, Well, you you you lose

0:19:05.359 --> 0:19:07.720
<v Speaker 1>a bit of money, um if you're the central bank,

0:19:08.119 --> 0:19:12.040
<v Speaker 1>from what's called senor ridge, which is the interest that

0:19:12.160 --> 0:19:17.240
<v Speaker 1>central banks earn on money they've issued. Essentially, when you

0:19:17.359 --> 0:19:20.280
<v Speaker 1>hold a note in your pocket, it's an interest free

0:19:20.320 --> 0:19:23.280
<v Speaker 1>loan to the government. But that's a pretty small amount

0:19:23.280 --> 0:19:26.359
<v Speaker 1>when interest rates are as low um as they are

0:19:26.359 --> 0:19:28.840
<v Speaker 1>at the moment, and actually in the many places now

0:19:28.920 --> 0:19:31.760
<v Speaker 1>that interest rates are becoming negative, it's a it's a

0:19:31.800 --> 0:19:35.000
<v Speaker 1>negative loss. So it's that that really isn't a problem.

0:19:35.040 --> 0:19:39.400
<v Speaker 1>But I think that is more than offset by the

0:19:39.480 --> 0:19:44.359
<v Speaker 1>increased tax take. You don't have to assume very much

0:19:44.800 --> 0:19:49.280
<v Speaker 1>in terms of um greater tax payments from people who've

0:19:49.320 --> 0:19:53.400
<v Speaker 1>been using cash to avoid paying tax to more than

0:19:53.440 --> 0:19:58.000
<v Speaker 1>offset any potential loss from um Senior Ridge. And then

0:19:58.000 --> 0:20:02.520
<v Speaker 1>of course any reduction UM in the sort of massive

0:20:02.600 --> 0:20:05.720
<v Speaker 1>flows of money involved in crime has to be a

0:20:05.760 --> 0:20:10.719
<v Speaker 1>significant social benefit. Great well, Peter, this has been an

0:20:10.760 --> 0:20:15.160
<v Speaker 1>awesome conversation. Thanks so much. And if anyone has some

0:20:15.240 --> 0:20:19.280
<v Speaker 1>five hundred euro notes that they would like to not

0:20:19.480 --> 0:20:23.000
<v Speaker 1>have on their hands anymore, just contact us. I'm at

0:20:23.080 --> 0:20:27.880
<v Speaker 1>two zero two four s too willing to fly send

0:20:27.880 --> 0:20:32.920
<v Speaker 1>it over in a briefcase. Thanks Peter, Thanks very much.

0:20:33.000 --> 0:20:39.399
<v Speaker 1>Thank you so, Tori. I thought that was a really

0:20:39.600 --> 0:20:44.600
<v Speaker 1>fascinating conversation, and you know Peter's paper over fifty pages,

0:20:44.800 --> 0:20:49.639
<v Speaker 1>was fascinating to what did you learn? Well, I learned

0:20:49.680 --> 0:20:52.840
<v Speaker 1>that there is a lot to write about on this topic.

0:20:52.920 --> 0:20:56.840
<v Speaker 1>As you said, his research is extremely thorough, Um. But

0:20:56.960 --> 0:21:00.080
<v Speaker 1>I just think here the most fascinating thing is just

0:21:00.280 --> 0:21:06.760
<v Speaker 1>the sheer size and bulky nous that cash has and

0:21:07.040 --> 0:21:09.640
<v Speaker 1>what sort of equality that is to it, Especially when

0:21:09.680 --> 0:21:13.320
<v Speaker 1>you think of cutting out those big denomination bills. It

0:21:13.400 --> 0:21:16.720
<v Speaker 1>suddenly becomes a lot harder to do things that you

0:21:16.800 --> 0:21:21.160
<v Speaker 1>probably shouldn't be doing. But I think the the other

0:21:21.200 --> 0:21:23.840
<v Speaker 1>side of the story here has a really big point,

0:21:23.840 --> 0:21:26.000
<v Speaker 1>which is how much, say, do we want the government

0:21:26.040 --> 0:21:28.159
<v Speaker 1>to have over how we pay for things, how we

0:21:28.200 --> 0:21:33.119
<v Speaker 1>conduct private business. Mm hmm, yeah, I mean that doesn't

0:21:33.119 --> 0:21:36.000
<v Speaker 1>really concern me a whole lot. I would love to

0:21:36.040 --> 0:21:39.119
<v Speaker 1>live in a cash list society. Really, what if I

0:21:39.119 --> 0:21:41.159
<v Speaker 1>mean they tapped into all your stuff and saw that,

0:21:41.240 --> 0:21:44.439
<v Speaker 1>like you've then moaned me for like a drunken braunch

0:21:44.480 --> 0:21:47.679
<v Speaker 1>one day, and then that got leaked to vand and

0:21:47.720 --> 0:21:52.439
<v Speaker 1>then Dan was like, wait what, I don't know. I mean,

0:21:52.440 --> 0:21:55.080
<v Speaker 1>I don't think the government cares very much whether I

0:21:55.119 --> 0:21:59.200
<v Speaker 1>had a drunken brunch or not, but maybe point taken.

0:21:59.240 --> 0:22:02.240
<v Speaker 1>And and you know, so when I recently spent three

0:22:02.280 --> 0:22:06.520
<v Speaker 1>months in Japan, and Japan's like a super cash heavy society,

0:22:06.640 --> 0:22:08.520
<v Speaker 1>and I was always running to the A t M

0:22:08.560 --> 0:22:11.600
<v Speaker 1>because so many places don't take credit cards, um, and

0:22:11.640 --> 0:22:14.399
<v Speaker 1>I constantly had to be walking around with like, you know,

0:22:14.480 --> 0:22:17.600
<v Speaker 1>fifties sixty thousand yen in my wallet, which you know

0:22:17.640 --> 0:22:20.320
<v Speaker 1>in Tokyo. Tokyo is a pretty safe society, so it's fine,

0:22:20.400 --> 0:22:22.879
<v Speaker 1>but it made me feel uncomfortable. Yeah, I can totally

0:22:22.920 --> 0:22:26.240
<v Speaker 1>understand that. Well, lots of good arguments on both sides,

0:22:26.240 --> 0:22:29.280
<v Speaker 1>and will be really interesting to see if this gains

0:22:29.400 --> 0:22:31.880
<v Speaker 1>traction here in the US now that Europe is doing

0:22:31.960 --> 0:22:35.840
<v Speaker 1>something about it. Yeah, definitely Well. Benchmark will be back

0:22:35.880 --> 0:22:38.639
<v Speaker 1>next week and until then, you can find us on

0:22:38.720 --> 0:22:41.439
<v Speaker 1>the Bloomberg Terminal and Bloomberg dot com, as well as

0:22:41.520 --> 0:22:45.160
<v Speaker 1>on iTunes, pocket Cast, and Stitcher. And while you're there,

0:22:45.200 --> 0:22:47.359
<v Speaker 1>please take a minute to rate and review the show

0:22:47.440 --> 0:22:49.960
<v Speaker 1>so more listeners can find us and let us know

0:22:50.040 --> 0:22:51.760
<v Speaker 1>what you thought of the show. You can talk to

0:22:51.840 --> 0:22:54.639
<v Speaker 1>us and follow us on Twitter at Akito seven and

0:22:54.680 --> 0:22:58.240
<v Speaker 1>that Tori stillwell. You can also email our producer at

0:22:58.280 --> 0:23:01.720
<v Speaker 1>a McCabe with to see is at Bloomberg dot net.

0:23:01.920 --> 0:23:09.359
<v Speaker 1>See you next week. M