Fighting crime is a tough job. And so, shortcuts are often proposed. The latest is to : ban €500 notes. These dastardly beasts (introduced to not annoy Germans who used DM1000 bills) are it seems uniquely the provenance of criminals. So, if we recall them, and ask people to explain where they got them it might fight crime. Because criminals now keep all their money under the bed dontcha know. Curiously and worryingly the author, a well respected financial journalist, thinks that a) reducing euro area money supply is good and b) it will somehow alleviate sovereign debt. Its a bonkers article, frankly. And not even internally consistent.
There are about €290b worth of euro 500 notes in circulation. In terms of numbers of notes these are about 580k of the 14m odd euro notes in circulation.
Of course, the ‘bin laden’ (so called because although every one has heard of it nobody has seen it) is not now nor in history the largest denomination note. Leaving aside hyper inflationary episodes, we have seen large denomination notes. The USA issued a $10,000 note in the 1930s. These are now withdrawn and the $100 the largest. Try using these to pay for anything…one expects a SWAT team to cap your ass. Switzerland has a CHF1000 note in circulation. Singapore has S$1000 and S$10000. Even latvia has LV500 note. Presumably these should be banned also?
More seriously this is part of a common fallacy – that money is the note in your pocket. Its not. Its much much wider than that. M3, a broad (but not nearly the broadest) measure of money, is about €10,000b. So the dastardly binLaden is less than 3% of the whole. While its conceivable that this is all in the hands of crime its unlikely. Serious criminals have their money laundered into clean assets. Amateur ones have wads of fifties. I have no idea who uses these notes. I can’t see a need for them personally but….