The war on cash continues.
This time, the European Central Bank (ECB) president Mario Draghi said in a statement that he is considering phasing out the 500 euro bill because it’s widely used in criminal activities.
On Monday, Draghi stated at a news conference that the 500 euro banknote as well as high denomination banknotes “are used for criminal purposes.” The ECB is in charge of issuing euro banknotes, which are used by all 19 eurozone nations.
Draghi noted that ECB officials are discussing on what to do with the banknote. However, any and all actions are being considered and would be meticulously executed.
This comes only days after Jeroen Dijsselbloem, the head of eurozone finance ministers, urged the ECB to tackle terrorists’ widespread usage of the 500 euro bill.
He wrote in a tweet:
“Asked Commission to engage with #ECB to consider possible measures regarding high denomination notes, in particular 500 euro note #EU2016NL.”
Asked Commission to engage with #ECB to consider possible measures regarding high denomination notes, in particular 500 euro note #EU2016NL
— Jeroen Dijsselbloem (@J_Dijsselbloem) February 12, 2016
Last year, a Europol report said that 500 euro banknotes make it a lot easier for criminals to participate in money laundering schemes because they’re easy to move around due to a paucity of detection.
Although 500 euro bills aren’t popular for everyday transactions, they are the “instrument of choice” for terrorists and they remain high in demand.
“The 500 [euro] note alone accounts for over 30% of the value of all banknotes in circulation, despite it not being a common means of payment,” the report said.
Of course, the idea of certain cash denominations being used for illicit activities is regularly used by those who want to abolish cash.
Recently, a report released by Harvard’s Kennedy School urged G20 governments to prohibit all high-denomination notes because they fund crime and help with tax evasion.
Trond Bentestuen, executive vice president at DNB, said last month that the Norwegian government should mull over implementing a cashless society because much of the 50 billion kroner in circulation is unaccounted for and likely used to fund money laundering schemes (SEE: War on Cash: Norway’s biggest bank wants a cashless society because of crime).
The examples are endless.
Economist Joseph Salerno goes further into the so-called central bank-speak:
“As a long-time auditor of central bank-speak, I can tell you that Draghi’s explicit denial that the decision has anything to do with suppressing cash is a resounding affirmation that abolishing cash is precisely its purpose. By making it more unwieldy and costly for those in the Euro zone to hold their money in the form of cash, the ECB immediately increases the range within which it can manipulate interest rates in negative territory. Furthermore, since criminals are rational economic actors who compare marginal costs and benefits, they are not going to suddenly stop committing crimes or begin transferring funds electronically, but instead will shift the bulk of their transactions and accumulated wealth to the less convenient 200-euro notes, which will then become the next target of the ECB’s cash abolitionists. Thus one should take little comfort from Draghi’s flippant comment that with the disappearance of the €500 note, people can hoard cash in €200 notes.”
It’s time to start hiding money under your mattress again. Don’t worry, with subzero interest rates you won’t be missing out on any interest anyway.
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