Several countries around the world have started banning large banknotes over the past few weeks. As a result, financial trouble ensued in both India and Venezuela. But it looks like more harsh lessons need to be learned, as the Australian government now wants to get rid of the AU$100 note. A very strange decision at this time, and another way to push people to alternative solutions such as Bitcoin.
Australian Government Plans To Abolish AU$100 Note
Every country in the world suffers from a shadow economy, where cash payments are the norm. Fighting that black market trend is not easy, although governments and regulators are convinced abolishing large banknotes is the right way to go. A similar experiment in India and Venezuela have shown, that isn’t to the answer.
Anyone who has black money, or participates in the shadow economy, makes sure they get rid of the cash as quickly as possible. Instead, criminals will invest in gold, stocks, and even artwork to “”launder” funds. Moreover, these investments offer a way for criminals to both hide their wealth, and make a profit on their initial purchase over time.
But the Australian government feels the AU$100 bill is one of the largest culprits in the local shadow economy. Additionally, there is a plan on the table to curb cash payments over a certain undisclosed threshold. Right now, virtually all cash payment in the country are untaxed, costing the state a lot of money every year.
It has to be said; there are three times as many AU$100 notes in circulation compared to AU$5 notes. Rather strange, as most people tend to use smaller bills for everyday purchases. The question as to why this is the case remains unanswered for now, but it is something worth looking into. Moreover, nearly 92% of all currency in circulation consists of AU$50 and AU$100 notes.
Removing the AU$100 note from the equation is not out of the question, although it depends on what an expert panel will advise. The biggest question to consider is how criminals won’t mind using two AU$50 bills for every AU$100 bill removed from circulation. It is not a disincentive to switch from one large banknote to a slightly lower once.
It is evident this is only a ploy to get people to deposit more money into their bank accounts. UBS is one of the biggest proponents of getting rid of AU$100 bills, as it would increase the number of household deposits by 4%. In doing so, consumers would provide more liquidity to banks, which is not an ideal solution for anyone but the financial institutions.
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