Okay, perhaps the title of the post is not quite as memorable as Charlton Heston’s famous line from Planet of the Apes, but it certainly captures my sentiments after reading an article in Slate that calls for the elimination of the $100 bill. The author, Timothy Noah, says that large bills are only for “criminals and sociopaths.” Here’s the crux of his argument.
…why does the U.S. continue to print C-notes…? Technological change has reduced much further the plausible need of any law-abiding American to carry a C-note in his wallet or to stash a pile of C-notes in his mattress.
Noah’s argument is unconvincing for several reasons. First, he is underestimating the degree to which “law-abiding” Americans use “Benjamins.” And with higher inflation almost certainly around the corner, one can safely expect that $100 bills will become even more common in the future. Second, his entire argument rests on the statist assumption that government should restrict honest people because this will somehow make life more difficult for criminals. Yet he debunks his own anti-money laundering argument by noting that the government already has stopped printing larger bills, such as the $500 note. Has that stopped the drug trade? Hello? Anyone? Bueller?
Like much of what government does, the campaign against money laundering is a costly exercise with very few tangible benefits. This video examines the cost-benefit issues.
I actually think the moral arguments against anti-money laundering laws are even more powerful. As Americans, we should have a presumption of innocence in our daily lives. What business is it of government whether we want to carry $20 bills or $100 bills? And think about the implications of these laws. What if the government said we need to ban cars, or put government-monitored homing devices in all vehicles, because bank robbers occasionally use automobiles as getaway vehicles? In this case, there is a theoretical benefit to the policy, just like there is a somewhat plausible case for anti-money laundering laws, but presumably we would reject such a policy as too intrusive.
Anti-money laundering laws are a classic case of Mitchell’s Law, which is the notion that bad policy begets more bad policy (this insight has been around forever, but I’m quite envious of Art Laffer for the Laffer Curve, so I’m trying to give myself a small measure of notoriety by being the lead proponent of the concept). The government passes drug laws that create huge profits for criminals. But rather than fight criminals (or, as libertarians would argue, get rid of victimless crimes), the government imposes policies that make life more difficult and costly for everyone else.
But regardless of what people think about drug laws, let’s at least use common sense and tell the crowd in Washington that it’s our choice whether we use $100 bills.
[…] P.S. A recent aspect of AML/KYC laws is that there are proposals to ban cash (including the $100 bill). […]
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[…] When writing about money laundering laws, I’ll sometimes highlight gross abuses by government and I’ll periodically make the usual libertarian arguments about privacy. […]
[…] When that impractical goal wasn’t achieved, they exacerbated the harm to civil liberties with onerous money laundering laws and abusive asset forfeiture […]
[…] When writing about money laundering laws, I’ll sometimes highlight gross abuses by government and I’ll periodically make the usual libertarian arguments about privacy. […]
[…] When writing about money laundering laws, I’ll sometimes highlight gross abuses by government and I’ll periodically make the usual libertarian arguments about privacy. […]
[…] makers coming up with schemes to expand the burden of money laundering laws. Some of them want to ban the $100 bill, or perhaps even ban cash entirely. All so government can more closely monitor the private […]
[…] is that they still have a long way to go before achieving their goals. Notwithstanding agitation to get rid of “Benjamins” in the United States, that doesn’t appear to be an immediate threat. Additionally, according to SwissInfo, is that […]
[…] led me to paraphrase a line from the original version of Planet of the […]
[…] led me to paraphrase a line from the original version of Planet of the […]
And, bring back the $500 and $1000 bills while we are at it.
ihate…: “….we have to do something?”
No, no, no, no, no, no, no, no, NO. WE. DON’T. Those five words are the last you’ll hear right before crappy policy that is going to screw things up worse. It’s worse than DOING NOTHING! Errrrrrrrrrr! You make me want to remove my ears with a cheese grater so I never have to hear that again.
[…] used the Drug War as an excuse to enact reprehensible and costly laws on asset forfeiture and money laundering. One foolish policy leads to a couple of other misguided policies. That’s Mitchell’s […]
[…] the Drug War is the main excuse politicians given when they impose bad asset forfeiture laws and costly anti-money laundering laws. And it’s the Drug War that is usually the motive when politicians and courts erode our […]
[…] I’ve complained many times about the pointless nature of anti-money laundering laws. They impose very high costs and force banks to spy on their customers, but they are utterly ineffective as a weapon against criminal activity. Yet politicians and bureaucrats keep making a bad system worse, and the latest development is a silly scheme to ban $100 bills! […]
[…] now the statists are even talking about getting rid of the $100 bill, making life even more […]
[…] now the statists are even talking about getting rid of the $100 bill, making life even more […]
[…] The Drug War doesn’t work, and it is the ultimate example of Mitchell’s Law since it has spawned bad policies such as asset forfeiture and anti-money laundering rules. […]
[…] There are lots of examples of this phenomenon, such as the misguided War on Drugs being a precursor to intrusive, costly, and ineffective money laundering policies. […]
[…] There are lots of examples of this phenomenon, such as the misguided War on Drugs being a precursor to intrusive, costly, and ineffective money laundering policies. […]
That currency is going to be used by bad people is something that just has to be accepted as inevitable.
More, the real agenda behind eliminating the $100 bill has nothing to do with money laundering.
It has to do with a state that no longer trusts the citizen with any form of concentrated power.
Given that reality the movement should be in the opposite direction. $500 and $1000 billls should be revived immediately. The $1000 after all has less purchasing power today than the $100 did when the $1000 bills were removed from circulation during the Nixon era.
This is a fairly familiar argument against anti-money laundering requirements. As someone who has worked in the AML field for fifteen years now, I am still waiting for someone to suggest a sensible alternative. Given that none of us wants our financial systems to be used by criminals (I am assuming that most people feel this way….?), what do you suggest we do to prevent it? Surely the identification of customers and the querying of their money movements is a good start? Or would you do something else, given that we have to do something?
[…] to grab his money without convicting him of a crime. Especially for a supposed offense against absurdly foolish and ill-conceived anti-money laundering […]
[…] to grab his money without convicting him of a crime. Especially for a supposed offense against absurdly foolish and ill-conceived anti-money laundering […]
“And with higher inflation almost certainly around the corner, one can safely expect that $100 bills will become even more common in the future. ”
I don’t agree that inflation in USA is around the corner. Goverments can’t do in modern states so much harm with core money supply because they can’t create credit, wich is very important factor in money supply. This is why i think that is gonna be more like Japan (deflation). Read also this:
Williams Calls for “Great Hyperinflationary Great Depression”; A Very Easy Rebuttal
http://globaleconomicanalysis.blogspot.com/2010/12/williams-calls-for-great.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Reminds me of my years in Canada when I had to pay my rent in cash & the ATMs never dispensed anything larger than a $20 bill. Not being able to fold my wallet made me feel richer, if only temporarily.
We will need larger wheel barrows when the time inevitably comes.
Actually, the US should revive the $500 and $1000 Dollar bills.
A $1000 bill is worth less today than a $100 was when they stopped printing anything larger than a $100 in the late 1940s.
Classic example of pour dear government shrinking the amount of power it allows to be in the hands of the honest citizen.
With Bernanke at the helm, $100 is the new $20. Perhaps we should really be talking about getting rid of the $1 bill, since it’s largely useless and takes up too much space.