$1.5 Trillion in Cash Missing in Action, Boosting Case for Blockchain and Digital Currencies
US Treasury Secretary Steven Mnuchin has addressed reports that $1.5 trillion worth of $100 bills have disappeared. Mnuchin says the unaccounted bills are presumably locked away in banks all over the world. He attributes the missing money to the high demand for US dollars as a reserve currency.
In an interview on Fox Business with Lou Dobbs, Mnuchin highlights the economic prowess of the US and the dollar.
“The dollar is the reserve currency of the world, and everybody wants to hold dollars. And the reason why they want to hold dollars is because the US is a safe place to have your money, to invest and to hold your assets…
Literally, a lot of these $100 bills are sitting in bank vaults all over the world.”
Mnuchin, who has spoken out against cryptocurrencies and has called Bitcoin a “national security issue” says it’s interesting to see “the demand for US currency continues to go up” despite an increasingly digital world.
The US Federal Reserve reports that the circulation of US dollars reached $1.79 trillion on December 9th, comprised of $12.4 billion in $1 bills and $1.3 trillion of it in $100 bills. The latest figures represent a surge in bills, up from $1.2 trillion in 2013.
According to a report by the Wall Street Journal,
“Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. Central banks don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery.”
While Mnuchin is underscoring the best case scenario, Nicholas Colas, co-founder of DataTrek research says the surge in big bills is indicative of a bigger problem.
“There’s certainly enough evidence to say it is an enabler of corruption, but it is also a way for people to keep assets outside of the financial system.”
In a New York Times op-ed entitled “America’s Most Powerful Export: Money,” Binyamin Appelbaum points to the proverbial mattress – not banks.
“The available evidence suggests large numbers of $100 bills are stuffed in mattresses or other hiding places – particularly in nations where people lack confidence in the value of the domestic currency, or the integrity of the financial system, or the safety of private property. Dollars are hoarded like diamonds, except dollars are easier to spend.”
Blockchain technology enthusiasts note that central bank digital currencies (CBDCs) solve the guessing game. By issuing currencies on a blockchain, ledgers keep track of transactions and allow for traceability.
Governments and central banks – from China to Sweden – are being prompted to use the technology for both traceability and faster transactions.
Despite advances by governments around the world that are developing blockchain-based systems for new digital currencies that can harness the power of technology, the prevalence of mobile devices and the shift toward instant and on-demand transactions, Mnuchin and Federal Reserve Chairman Jerome Powell say there’s no need for a US dollar digital currency.Featured image: Shutterstock/Rost9