Cash Refuses to Die, But the €500-Note Is a Goner

War-on-Cash Backlash.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

“You got to be kidding, we can’t take that,” says the shop assistant as a man places a €500 bill in front of her for a €10 purchase. A waiter at a Michelin-star restaurant gives a similar response despite the fact that the total bill for the meal came to well over €100. Beginning to despair, the man then tries to pay part of his rent with the €500 note — something he has done several times before — but even the property agency refuses to take it.

“Things have changed,” says the property agent. “We now have to jump through hoops trying to explain to the bank where every single one of these bills comes from. It’s not worth our bother.”

This is happening all over Spain. The €500 banknote has lost much of its allure in Spain. Twelve years ago, the country was home to a staggering 26% of all the €500 notes that circulated in the Eurozone, then a 17-country currency bloc. As El País reported at the time, much of the money was being used in the thriving real estate sector, which is one of the main sources of black money as well as a popular conduit for laundering the proceeds of crime.

In 2006 Spain was in the midst of one of the most insane property bubbles of modern times and the €500 bill was everywhere. But now, 12 years later, the love affair is over.

In January the total value of all €500 euro banknotes in circulation in Spain was just €19 billion — the lowest level since 2003 and down from €33 billion In May 2016.

That was just before the ECB decided to stop producing €500 banknotes as of the end of 2018. The bill will continue to be accepted as legal tender, but the phasing out of the Eurozone’s highest denomination note has already had its desired effect: most consumers now associate it with criminal activities, such as corruption, drug trafficking, or the financing of terrorism. And as the real estate agency said in the example above, dealing with it is more trouble than it’s worth.

The decline in the use of the €500 note has in part been compensated by a commensurate increase in the use of other high denomination bills, particularly the €50 note. The number of €50 banknotes in circulation in January, at 1,027 million, is 4.8% higher than a year ago. According to Europa Press, since 2010 the overall use of €50 bills has been on the rise.

For the moment there’s little evidence that Spaniards are sharply reducing their use of cash in transactions, despite the best efforts of government, banks and credit card companies.

In the last couple of years, Spanish banks have pulled out all the stops to promote cashless payments, but to little avail. As in Germany and Italy, cash is still very much king at the point of sale (POS) in Spain, accounting for 71% of all retail transactions in 2016 — compared to 74% in 2011. In other European countries such as the UK, the Netherlands, Poland and Sweden the decline in cash usage has been far more dramatic.

However, Spain could see further limits on cash usage as part of proposed EU-wide cash restrictions that could come into effect as early as this year. But as we reported in February, sprouts of resistance are rising against the establishment’s escalating war on physical cash, not only from the public but also some senior central bankers.

In a speech hosted by the Bundesbank, Yves Mersch, a member of the ECB’s executive board, praised cash’s as legal tender, including for the privacy is provides, and heaped scorn on the argument that its anonymity only helps criminals. “No particular link can be established statistically between cash and criminal activities,” he said. “The focus must be on the fight against crime. Cash must not be made the scapegoat.”

In February a Bundesbank survey confirmed that attempts to turn the Eurozone into a cashless society would meet fierce resistance from Germans, with 88% against electronic means of payment. The Bundesbank is the Eurozone’s prime source of cash, accounting for about 60% of the currency area’s bank notes, and one of the world’s biggest issuers of notes and coins.

Despite the growing restrictions on the use of physical money, business is booming at the Bundesbank’s money printing division. Overall, demand for cash in Germany last year rose 7% — almost twice its nominal growth rate — to €635 billion. According to data cited by Mersch, in the last five years, the average annual growth rate of euro banknotes throughout the single currency region was 4.9% by value and 6.2% by piece.

In its three-yearly survey of the use of cash in Germany, the first since the Eurozone’s economic revival, the Bundesbank highlighted that over half the currency it produces ends up outside the Eurozone where it is hoarded by people to store their wealth in a liquid asset. In terms of global demand for bank notes, the euro was almost at par with the US dollar, said Carl Ludwig Thiele, who is in charge of the Bundesbank’s cash management. “This is an enormous vote of confidence in the currency,” he said.

In a delicious irony, any further attempts to undermine the role of physical money in the Eurozone could end up massively backfiring, by harming the euro’s position as a global cash hoard. The Bundesbank report should serve as a timely reminder that while the €500 bill’s days may be numbered, even in its erstwhile haven of Spain, the outcome of the War on Cash in the Eurozone is far from settled, especially given the extent of divisions that currently exist on the matter between senior members of the region’s political and monetary authorities. By Don Quijones.

In the War on Cash, a rare defense of physical money by an ECB Board Member. Read…  “Cash Must Not Be Made the Scapegoat”

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  46 comments for “Cash Refuses to Die, But the €500-Note Is a Goner

  1. TheDona says:

    Thousand dollar bills were recalled in the US in 1969. So yes they are behind the curve on banning large denomination bills.

    • Aikman says:

      Honestly, even if 1000$ bills were still in circulation, i rather receive a 1oz .999 gold coin over dollars, euros, yuans whatever….This tariff currency war is starting to look ugly….

      • Robert says:

        This “currency war” as you so correctly identify it has absolutely nothing to do with tariffs. IMO, it has everything to do with government control of free-minded citizens.

        “They” began the drive to BAN CASH, led in part by USA Bankster elites, in the last several years. Euro-region elites have been right out in front with the USA Bankster elites to remove our rights from us all.

        Let’s not conflate this assault on our freedom with international trade issues.

        • d says:

          “Let’s not conflate this assault on our freedom with international trade issues.”

          NIRP, can not work, when savers can withdraw their money, in cash.

      • Frederick says:

        Absolutely prefer the gold coin over fiat At least you have something of intrinsic value in the end

  2. Bookdoc says:

    My overriding fear of the “cashless society” is similar to my dislike of self driving cars. It gives someone total control over my behavior as far as travel and spending are concerned. I have no wish for an out-of-control government to have that info!

    • Setarcos says:

      Nothing to fear …they are all just good guys/gals and only trying to protect us. I used up all my large denomination bills paying my health insurance premiums anyway.

    • alex in san jose AKA digital Detroit says:

      This.

      About a year ago I was all excited about a new product I wanted to make, and then I realized that anything above board, recorded, etc was (a) going to make my life worse not better and (b) I’d probably actually realize about $2 an hour if I were lucky.

      So I play my trumpet on weekends for that cash, cash, baby. On a good weekend I make $60 and that’s grocery money, bus pass money, etc.

    • Robert says:

      Cash equals freedom. The US constitution is clear on exactly what constitutes cash — and even though few today want a purse full of US cartwheels and double-eagles, nobody I know has trouble with having 10s, 20s, 50s and 100s in their wallet.

      I’ll repeat for good measure, CASH EQUALS FREEDOM!

      And if there is one thing that governments the world-over hate, it’s individual freedom. Be sure of that.

      As one commenter here put it, more is stolen with the stroke of a pen (by the globalist elites, perhaps?) than by proles (like me and thee) wielding cash.

  3. Michael Francis says:

    Speaking of cars, criminals use cars to escape with after a robbery.
    Maybe the Government should ban cars as well to stop robberies.

    • walter map says:

      Well, maybe some of them. OTOH, a driverless vehicle allows the take to be split among one less conspirator, increasing the incentive. So no help there.

      As it is, most robberies, and certainly all the biggest ones, are committed using a pen in expensive offices. Presumably those involved have chauffeurs and/or chauffeuses, and have no need to make a quick getaway in any case.

      Speaking of which, US banks are about to be deregulated again. In other words, the already-inadequate invisible fence corralling the direwolves is about to be shut off, re S. 2155. Hopefully our illustrious hosts will avail themselves of this opportunity for some choice commentary. I’m putting the finishing touches on mine and have already removed some of the swear words.

      In the meantime we can all party like it’s 2007. Or is it 1929? I forget.

    • Tom Jones says:

      New cars will have kill switches which law enforcement will have access to.

      • elysianfield says:

        “New cars will have kill switches which law enforcement will have access to.”

        Fail to make the payment on your new car and see how fast someone finds that switch…I am under the impression that this facility has been available at least 10 years…possibly longer.

        • Not So Free says:

          YEP! GM calls it Onstar.
          Been around a while. I’m sure the others have somethin similar.

  4. PDB says:

    I only use credit cards for internet purchases (which I don’t make too many of), or things like rental cars and hotels. Every in-person transaction I make is in cash. We need to start bringing cash back.

  5. Peter says:

    Once all politicians and bankers give up their accounts off shore which are full of cash, plus the hoards they have in various other stashes throughout the world, then I’ll support it. And maybe they should ban property, super yachts, private planes, in fact anything we all aspire to, as these are all ways to launder money. Get real, if they ever try to get rid of cash I think the people holding it will turn it into guns and use it to stop them!
    And as an aside, why is we have to do what banks want or demand? It’s hardly in our wider interest is it? After all, they caused the subprime crash in 2008, not us, were bailed out by the tax payer (we weren’t) and several have been prosecuted and found guilty of illegal practices, including MONEY LAUNDERING FOR DRUG CARTELS and foreign currency rate rigging and yet we hold them up as bastions who know best and should be trusted? Nah sorry, all the time the hypocrites tell me what to do, it makes me more determined to keep cash and do as I see fit. They don’t like it as they can’t control it, and hence us.
    People need to fight back and stop the onslaught or corporate and government corruption and fraud and stop believing the lies we are fed. After all, if we have a disaster and power goes out, how are you going to buy anything? No cash machines, swipe machines in shops and no internet. Ah yes, cash! How silly of me not to have some spare; just in case!

  6. WT Frogg says:

    Old saying: ” When they have you by the short hairs the head soon follows.”
    Whenever someone mentions “cashless society” just think of what happened in Greece recently. This “war on Criminals/tax havens/ or whatever the bogeyman du jour is ” is nothing more than an attempt to control the peons.
    BTW: Canada is retiring the $1000 bill ( the Pinky as it’s known) from being legal tender in the future. These days trying to break a $ 100 bill is getting to be a PIA.

  7. NY Geezer says:

    The US Treasury minted several versions of the $500 bill, featuring a portrait of President William McKinley on the front. The last $500 bill was minted in 1945, and discontinued in 1969. However, the $500 bills not only remains legal tender. but they are worth anywhere between $600 to over $1,500 apiece and the average premium is about a 40% over the bill’s face value. However, some $500 bills can be worth much more. The most valuable is a $500 bill that was issued in 1928 and has a star symbol at the end of the note’s eight digit serial number.

    Perhaps the people in Spain and Europe are making a serious mistake when they treat the 500 euro note as being a bother to use when instead it should be treated as a note with a premium attached to its value because of its relative rarity. That would derail the efforts of the proponents of a cashless economy.

    • Robert says:

      Yes you are correct in everything you wrote.

      Perhaps the C-Note, the Franklin, will become the new 500. I know the old 500 and 1000 dollar bills are still legal tender. When I was collecting cartwheels about 40 years ago, the 1K notes were available in average circ condition for about $60-75 premium in Coin World. You can look it up in old issues.

      I never wanted to tie up a grand for a wonderfully adorable piece of paper, so I never bought one.

      TEN THOUSAND DOLLAR BILLS ARE STILL LEGAL TENDER :

      http://mentalfloss.com/article/23692/100000-bill-story-behind-large-denomination-currency

      That’s a fact jack !

    • Murdoch_Mysteries says:

      Paper money is ‘printed’, not minted. Coins are minted.

      The largest denomination note printed was in fact the US$100,000 gold certificate printed between 1934 and 1935. It was used for transfers between Federal Reserve banks.

      The largest denomination of circulating US paper money was the $10,000 note issued in 1928.

      Other denominations were $500, $1000, and $5000.

      These large denomination notes were last printed in 1945 and last issued in 1969.

      You can see images of these notes at:

      https://www.moneyfactory.gov/uscurrency/denomsabove100.html

      Unfortunately that site doe not have images of older gold and silver certificates. These can be seen at :

      http://www.friesian.com/NOTES.HTM

      While many people think that the introduction of new designs and features on printed money is new and exciting, IMO the changes usually foretell the coming debasement of a currency.

      Traditional designs and colors are replaced with new themes and unknown or little known subjects. A sort of ‘funny money’ replaces the traditional designs.

  8. David Rohn says:

    what s so funny is the pretext: to eliminate fraud and crime when in fact it s real purpose is to put the biggest criminals and fraudsters total in charge . but I bet it will backfire: as people get poorer and poorer, the underground economy will get bigger and bigger .. I guess you know when a civilization is managerially bankrupt when people with advanced degrees in economics and business no longer have a grasp of the fundamentals of these.
    Financiers and bank officers, and economic ministers aren t ‘the economy’, the people themselves are the economy; so even though they can thwart prosperity and create deprivation by serving themselves at the expense of the many, there s a tipping point, where the many simply make other arrangements: look at Cuba or any other controlled economy..the activity just goes underground…hilarious that the current crop of self-congratulatory oligarchs, banksters and despots in the former democracies missed that.

    • Silly Me says:

      It’s surprising we don’t have Brando already. It’s got electrolytes!

      • Silly Me says:

        Oh, well, we do. We just call it journalism, education, medical care, and more. It surely comes in different flavors!

  9. raxadian says:

    * For the moment there’s little evidence that Spaniards are sharply reducing their use of cash in transactions, despite the best efforts of government, banks and credit card companies.*

    Considering all the ecomical crisis Spain has suffered in their history and how most Spanish banks are in thin ice nowadays, this is not surprising.

    Add the political and economic crisis currently happening on Spain, plus all the corruption cases, is no wonder people there keep using cash.

  10. Silly Me says:

    Wolf: That makes me wonder, as usual, how long would it take for me to get my money back from FDIC if my bank croaked?

    • walter map says:

      It doesn’t work that way. A failed bank is taken over by another institution. Us commoners can normally expect to conduct business as usual, but should expect to eventually get a notice to have new checks printed up.

      Interestingly, bank failures are not an uncommon occurance:

      https://www.fdic.gov/bank/individual/failed/banklist.html

      Yikes, I say. Yikes.

      FWIW, the events of 2008 should have turned you off to ever dealing with a bank forever anyway, especially one that signs you up for promotional offers that you never agreed to, a practice which has redefined the meaning of ‘bank robbery’. Instead you should have your accounts with a credit union. Those also go bankrupt.

      • JMiller says:

        “the events of 2008 should have turned you off to ever dealing with a bank forever”… “Instead you should have your accounts with a credit union.”

        Nonsense. Credit unions are no more safer than banks. And some credit unions are worse than most banks.

    • Wolf Richter says:

      It works like this: The bank closes on Friday, regular hours. The FDIC people show up Friday night. Monday morning, the bank re-opens at the normal time, under the name of the acquiring bank (arranged by the FDIC) or under the name of the FDIC. There is zero wait for bank customers and depositors. Business as usual.

      I’ve been through it three times. Only the bank name on the statements changed.

      Just make sure your deposits adhere to the limits and rules as specified.

  11. Laughing Eagle says:

    The banking system wants to eliminate cash to lower their costs of storage, counting, and transporting the cash between banks. They can also eliminate ATM’s. And if negative interest rates are introduced, you will not be able to remove your deposits to avoid the negative charge. They also will have all your financial transaction data for them or to sell to someone.
    But they want to claim it is to prevent criminal activity. Hell, these TBTF banks are some of the biggest criminals if you look at all the fines they pay for fraud and manipulation of markets. And they can do it all without cash.

    • JMiller says:

      Wrong Laughing Eagle. If negative interest rates are introduced, eliminating cash will not prevent you from moving your money out of the bank. Depositors can take money out of a bank electronically or by writing a check. There are other financial institutions besides banks like mutual fund companies, brokerages, insurance companies, etc… Or they can buy a physical asset like precious metals or real estate.

  12. Frederick says:

    This cash elimination scheme is tyranny by TPTB and needs to be countered by We the people before it’s too late Same thing goes for their vile attempts to take away guns

  13. peter says:

    I find it interesting that if you or I do some fraud, only afew thousand maybe, or God forbid, tax, then we go to jail. But these banking bastards don’t. Why? How does that work? Why does no one see that as a felony in itself?
    I live in New Zealand and when I get on a plane and get off in Australia, the tunnel walls are covered in adverts for HSBC. A convicted bank, which is bankrupt, and has admitted to money laundering and paid a massive fine. But they can still advertise legally! How so? I never saw any other drug dealers being legally allowed to advertise their wares to people on planes. (Except the corporate legal drug dealers of course!). So why are they still in business and not in jail?

  14. hendrik1730 says:

    The smaller the banknotes being used, the more a country is corrupt. Same goes with inflation, high inflation is caused by bad government and a corrupt central banking system. And the ultimate goal of such policies is always the same : full control of the citizens’ savings to avoid them becoming independent of the government meddling with their lives by either confiscation or degrading the buying power of fiat. So, governments HATE gold and the like because that is immune to their tricks.

  15. desmond says:

    the banks are the master crims and so are way above the law.. only fall guys and scape goats go down from the banks and very few of those..
    as for them taking our money off of us that is exactly what this war on cash is about.. taking away any indepenance and seeking control over everyones pocket… the correct response is to use cash as much as possible and cards as little as possible…

    • Peter says:

      So it looks like most people on here are agreed; cash is king, lets us keep our independence, banks are crooks and governments not much better as they let them get away with their fraud. The big question is, what are we, the normal man and woman on the street and business, going to do about it? That is what REALLY interests me. Not just posting on blog sites and the like, but REALLY. In the REAL world we live in. We NEED to start taking our own lives back and taking control again of the corporate and political criminals. I don’t want to sound like Lenin, Washington, Bodicia, Che or any of the other thousands who have tried in the past, but I do wonder how you can motivate the 99% of the public who moan and complain and do absolutely sweet FA about it. Ideas anyone?

      • Robert says:

        Your question : “but I do wonder how you can motivate the 99% of the public who moan and complain and do absolutely sweet FA about it. Ideas anyone?”

        First step for us was this : Eschew debt. Period, have none of it [ (*) except for the NECESSARY low interest rate 30 year mortgage which will be paid off when I am 91 and she is 98] .

        A divorce, and starting over, engendered the mortgage, and that was discouraging for us. But we consider the mortgage to be rent, and it only takes 60% — of one of our Social Security checks — which ain’t really that bad.

        ESCHEW DEBT. Period. Case closed. Don’t buy anything using credit, ever.

        That decision is actually easier to make than the paying off of MY mummified historical debt that saddled ME with PAYING INTEREST TO THE MAN. Paying off the prior-me was a ten year piece of work, some would call it a struggle. But the air is free, and being free of debt(*) NOW, is quite a luxurious feeling too.

        In summary, choosing to work towards and become DEBT-FREE is an idea whose time has come. STARVE THE BEAST (banks) !

  16. Jackie says:

    The war on cash has reached Singapore. Starting last month, you can only withdraw specific amounts of 1,000-dollar notes…. and you have to fill out a form explaining why you need that denomination.

  17. R Davis says:

    It never ceases to astound me – in Australia the government & banks cry ‘there are no $100 bills in circulation’ – the accusation is that the elderly horde $100 bills under their beds. The elderly have their $100 bills in term deposit accounts – so as to acrew interest & yet this ridiculous story is circulated regularly with solutions to this non existing problem.
    Criminal elements have draws full of $100 bills in Australian movies – here I am prepared to give – in that for some criminals – thinking is not their strong point.
    Today, black money is electronic, here today, across the world & untraceable in an instant.
    So – either governments are keen to partake of the criminal activity & black money – or they are just plain stupid to want to eradicate it.

  18. R Davis says:

    A computer software tool sends you a bill.
    It sends you a reminder.
    If it did not.
    If it forgot you.
    The human element would never know you exist.
    The power company would never find out that you have not paid your bill for the last 10 years.
    That is how crime is committed on line – with efficient ease.

  19. R Davis says:

    This knowledge is lost on “them”- they live in medieval time – in the days of yore.

  20. R Davis says:

    example:
    maybe 15 years ago – I’m no good with time & dates.
    FOXTELL pay TV was selling for $100 a month.
    Independent providers were selling on FOXTELL pay TV to their customers for $35 per month – consumers who were potential authentic FOXTEL pay TV customers – only that they met the sub-contractor first.
    Clever global corporate FOXTELL never knew that maybe 50% of its customer base was getting it from someone else for less.

  21. Kraig says:

    Wait. Can’t pay rent in €500 note. Since he offered and they declined does that mean he can’t be considered a non-payer? I mean what if that’s all he has got?

    • peter says:

      Interesting you say that Kraig. I tried to pay my airport parking with cash and the place said credit card only. So I had to use that. I mentioned it to a lawyer friend of mine and he said that as long as you offered to pay in legal tender, if they refuse it that’s their issue and you can walk away. You cannot be prosecuted as you offered legal tender and it’s their decision not to accept it. So next time, I will offer to pay only in cash……..

      • d says:

        Both of you did not have to use methods other than cash. UNLESS its clearly displayed in the terms of trade (car park BEFORE entry)) or in the Tenancy Agreement (rent).

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