ROBERT SMITH, HOST:
Hey, thanks for listening to PLANET MONEY. After you listen to this show, we suggest that you check out some of the other fine NPR podcasts, including Snap Judgment with Glynn Washington. It's a great storytelling program. If you like The Moth, This American Life, you're going to like Snap Judgment. You can find Snap on iTunes under podcasts.
The United States makes a product that is beloved all over the world. It never goes out of style. It always makes a lovely gift. It is the $100 bill.
CHRIS ARNOLD, BYLINE: If you look at the value of all the currency out there, the $100 bill is the most popular product from the Federal Reserve. In fact, Robert, 80 percent of all the cash out there, 80 percent is in $100 bills. It's about a trillion dollars' worth.
SMITH: But for all those $100 bills that the U.S. government has printed, where are they all? You rarely see them out in real life. They're not in my wallet. They're probably not in yours. Atms almost never disperse them. Even here in New York City, one of the richest cities in the nation, there are signs all over the place that say no, no, no, we do not take $100 bills.
ARNOLD: And the Federal Reserve of the United States, the people who put their name on the U.S. currency, when they counted up all the $100 bills that they could find in the bank vaults and everywhere else, they found that they had no idea where most of them had gone. Hello, and welcome to PLANET MONEY. I'm Chris Arnold.
SMITH: Who joins us from NPR's business desk. He's an economics correspondent. I'm Robert Smith. Today, on the show, where in the world are all the $100 bills? What is Benjamin Franklin being used for - for good, for evil, for drugs, strippers, maybe just tucked into a graduation card from your aunt. And if we don't know where they are, should the United States keep printing them?
(SOUNDBITE OF SONG, "MILLION DOLLAR BILLS")
LORDE: (Singing) There's nothing I want but money and time. Million dollar bills...
SMITH: First, let's tackle where exactly the money went. And this is not an easy question. In a way, the whole point of cash is that it's anonymous. It's a perfectly portable way to carry value accepted anywhere. And for years, the Federal Reserve didn't worry too much about where all the money was because cash usually ends up back in the bank anyway.
ARNOLD: But about 20 years ago, the Fed looked around and saw that a lot of the cash was not returning. They could see that vast sums of currency - really, really huge amounts of dollars - $100 bills especially - were leaving the country.
RUTH JUDSON: At some point, Alan Greenspan said so, you know, how much is it? And people didn't know the answer, and we just thought that we should know the answer.
ARNOLD: This is Ruth Judson. Twenty years ago, she was fresh out of MIT and had just started a new dream job at the Federal Reserve.
SMITH: And she says it was sort of baffling, troubling even, not knowing where all the money was. I mean, part of this is purely a practical issue, right? The Fed needs to know how much money to print and how to plan the money supply. But for her it was also an intellectual puzzle. The Fed makes just one thing, it has one product, money. So if there's one thing at least it should try to know, it should know where the money is, what it's being used for.
ARNOLD: Ruth was put together with a team of economists and Secret Service agents. They were given an assignment to go hunt for the $100 bills. The first stop - the former Soviet Union.
JUDSON: They needed somebody to travel to Belarus in December.
ARNOLD: So there were, like, Secret Service guys who have, like, guns and stuff.
JUDSON: They would not travel armed because this was not a protection assignment.
ARNOLD: I'm just getting excited about all the...
SMITH: We just have this image of you as this special - like, this spy novel team coming in.
JUDSON: It really was not that glamorous.
ARNOLD: It involved asking a lot of questions, going to banks, banking officials, foreign exchange booths and just asking how many $100 bills that anybody seen.
SMITH: So that's the official part of the mission. But those questions only got them so far because the first thing they learned is that most of the trade in $100 bills is not official. You can't ask a central bank about it. In fact, it's the opposite of official. People in the former Soviet Union wanted U.S. money because they didn't trust their banks. They didn't trust their government. The whole point of saving with a $100 bill is to keep it secret.
ARNOLD: Ruth says that in order to get a true sense of what was really going on out there where the $100 bills really were, she would go on long unofficial walks during her stay in Belarus.
JUDSON: You can tell a lot, for example, about what's going on with dollar usage just by looking around.
SMITH: Because if people are using $100 bills, they leave clues, like those currency exchange booths.
JUDSON: If you were in a department store and you saw that they had an exchange point, that told you something.
SMITH: Told you that everyday people shopping at a department store were likely keeping their savings in something other than the official currency. That's why they needed an exchange booth.
ARNOLD: You could look at the exchange rates inside of those stores and that would tell you something, too. If they were doing a brisk business in dollars, then there was competition. Lots of people were changing money, and they would have pretty good rates.
SMITH: Ruth would do this sort of amateur sleuthing not only in Belarus but in countries around the world as they were looking for $100 bills. And she'd always look wherever she went for signs of a lack of faith in the local currency.
JUDSON: In two countries, I saw the local currency being weighed in a transaction.
SMITH: You mean they used an actual scale to figure out how much money was was being traded.
JUDSON: For small denomination notes, yes.
ARNOLD: Much of this was anecdotal, but Ruth started to put together a map, if you will, of who in the world was using U.S. dollars.
JUDSON: We did go to Russia, to Belarus, to Argentina. I believe we went to Peru pretty early on, Cambodia, Kazakhstan, Ukraine.
SMITH: But in order to answer Alan Greenspan's question, Ruth had to figure out exactly how many dollars were abroad, which, you know, how do you figure out a real number when people are hiding their bills, when they're lying about how much U.S. money they have? Well, there is a trick to figuring out something like this. It is a trick used by fish biologists to figure out how many fish are in a lake.
ARNOLD: And like a $100 bill, fish hide. They hide under rocks. They don't tend to hide in mattresses, but you can never know how many are lurking out there. So what you do is you catch a bunch of fish, let's say 100. You tag the fish, and you let them go back into the lake.
SMITH: Then you let them swim around randomly. And then later on, you pull up another hundred fish. It's sort of a random sample. And you look at how many fish are tagged in this new sample. And if, let's say, you tagged a hundred at the beginning and now half the fish are tagged in the new sample, you know that there are approximately 200 fish in the lake.
ARNOLD: And an economist at the Fed, he realized that the same trick would work with currency. When the U.S. releases a new version of a $100 bill, that's kind of like a tagged fish. In fact, one of the more recent ones had a purple stripe on it. It literally was tagged. And so Ruth and her team would wait a few months and sample U.S. currency abroad and see how many of the new bills popped up. And because of that, Alan Greenspan finally had the answer to his question.
JUDSON: In the fish method, what we found was - for hundreds in particular - that probably about as much as two-thirds was overseas.
SMITH: Two-thirds of the $100 bills are outside the country.
ARNOLD: That's like half a trillion dollars in $100 bills, which are somewhere out there outside of the U.S.
SMITH: Finally, the Fed knew where the money was. But there was an obvious next question. Should we be worried about this?
ARNOLD: OK, so let's start with the most generous interpretation of what's going on out there. The $100 bill is not popular because it's pretty and people like to look at it, although some people do. But really what it's about is that people have faith in the United States.
SMITH: They have much more faith than they have in their own country. And, you know, I've seen this in countries around the world. I was reporting in Myanmar, in Burma, and people there said, listen, I do not trust my banks. I do not trust my government. And so at one point, my translator showed me his entire life savings. They were all U.S. $100 bills, pressed into the pages of a book.
UNIDENTIFIED MAN: I always bring my money with me.
SMITH: You have crisp $100 bills in here. They're perfect. They're beautiful. Look at this.
ARNOLD: So there's lots of these little stashes that are helping out ordinary people, and arguably that's a very good thing. You know, it helps them save money. But there's a not-so-good side, too.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED WOMAN: A huge bust in Mexico. In fact, Mexico's president saying it could be the biggest drug bust in the world. Police finding more than $200 million at...
SMITH: That's Fox News reporting on a drug bust a few years ago. You want to know where the $100 bills are? Well, they discovered a small mountain of them.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED WOMAN: Wads of U.S. cash so high, it was stuffed to the ceiling. It was also in closets and bulging out of suitcases.
SMITH: This is not the image the Federal Reserve wants for $100 bill, piled up in a Mexican drug closet. But this is a reality for the hundred - not just drug smugglers but human traffickers, arms dealers. They all love $100 bills. You can put a million dollars in a briefcase in the overhead luggage bin. You could surround yourself with stacks and stacks and stacks of hundreds.
ARNOLD: And some people do.
RICHARD STRATTON: I liked it. It settled my nerves. You know, it was nice to sit and smoke a joint and count hundreds of thousands of dollars. It was a pleasant, relaxing experience for me.
ARNOLD: Richard Stratton's a former drug smuggler. He specialized in marijuana and hashish. Unfortunately for him, he did eight years in prison. Now he writes about the whole experience. And Stratton was not a small-time crook. In one deal alone, Robert, he brought in 15,000 pounds of hash hidden inside shipping containers that were filled with Middle Eastern dates. And getting those in and past customs and all the things he had to do, that was only half the job. Then he had a mountain of cash.
STRATTON: That was a $50,000,000 deal wholesale, so, I mean, we made a lot of money. And that's where it became a whole different thing. We're smuggling the money out of the country.
ARNOLD: To Lebanon, to Baghdad, to his accounts in the Cayman Islands.
SMITH: Richard didn't need the fish counting method to know how the global trade in $100 bills worked. It was a constant struggle for him. He needed hundreds to make the transportation of all his profits easier. His overseas partners, they wanted hundreds. But remember, here in the United States, where he sold his product, people don't routinely use $100 bills. Street trade is in tiny bills, and he tells this story of one of his men.
STRATTON: Dr. Kato we used to call him, a real interesting character. He owned shoe stores in Philadelphia, but he was also a large-scale marijuana dealer. And he would constantly - when he showed up to pay his bill, it would be a big garbage bag full of rolled-up bills that would have, like, little numbers written on them. And we would have to sit there and unroll it all, count the 10s, the 5s, the 20s. And you never knew, you know, whether these little bundles were going to be accurate as to how much they had. But he was such a lovable guy. We'd constantly - Dr. Kato, come on now, bring us some big bills. But he'd say, yeah, yeah, no problem, no problem.
SMITH: But this is a serious problem in the drug trade. Richard told us that some drug dealers had people working full-time, whose sole job was going to banks and changing tens and twenties into $100 bills.
CHRIS ARNOLD, BYLINE: And talking to Richard, it sounds like he became sort of a major distributor of $100 bills around the greater New York area. They were in his suitcases, his stash houses. He'd always had a big roll of them in his right front pocket. And actually, Robert, there's this one kind of ridiculous story where - this was at a just out-of-control moment in Richard's drug dealing life where he was living at the Plaza Hotel in New York, a very, very fancy hotel, and just throwing money around. To get away with that, he also came up with a peculiar cover story.
STRATTON: They thought I was a psychiatrist. I told them I was a psychiatrist to try to explain large numbers of odd characters coming in and out of my rooms at all hours. I was Dr. Lowell. And I would hand out $100 bills to all the staff. The people who cleaned the rooms would get a hundred from me. The guy who was the maitre d' in the restaurant would get a hundred and bellman would get a hundred so that they would - they loved me. Dr. Lowell, they would - you know, they were just like - how are you? - expecting to get their $100 bills.
ARNOLD: Do you really think they believed that you were a psychiatrist? I mean, you know, a guy staying at the Plaza throwing $100 bills around.
STRATTON: No, no, I'm sure they had an inkling of suspicion of what we were up to.
SMITH: It's scary to think that if you're in the New York City area and you get a $100 bill from someone, it may have originated with Richard...
ARNOLD: It might've been in Richard's pocket.
STRATTON: ...Or someone like him. So when you hear his whole story, you can see the jam that the Federal Reserve is in. The government prints $100 bills, most of them go to other countries. And, yeah, it helps the United States. It helps the little guy in Russia and Argentina and Myanmar. But it is this major tool for drug dealers and just about every other bad guy on earth that needs untraceable money in large nominations.
ARNOLD: And because this is going on, all this nefarious stuff all over the world, some people say that maybe we should just kill the $100 bill, stop making them. And serious, big-time, legitimate people say this. I was talking with economist Ken Rogoff at Harvard, and he says that whatever benefit we might get from distributing these $100 bills all over the world, maybe it's time for the Fed Reserve to think should it be helping these kinds of criminal organizations?
KEN ROGOTH: Think about countries like Mexico, Colombia, where they're really at war with the drug money, where the United States is not only buying the drugs but it's providing this resource that very much helps the drug dealers where these governments are barely able to hold their own because there's so much money.
SMITH: Now, think about it, Rogoff says, if the United States stopped printing $100 bills tomorrow, would you miss them?
ROGOTH: They do surveys, and the average person reports, you know, holding $100 bill once a year, you know, something like that.
ARNOLD: We brought this up with Ruth Judson at the Fed, and she said though that she's personally not that convinced that we have to do away with the $100 bill. It turns out that even after all of her sleuthing and her research and traveling the globe, we still don't know the balance of, OK, well, how much of the $100 bills are used for good stuff and how much for bad stuff?
SMITH: And to be frank, there is another problem with getting rid of the $100 bill. Right now, the U.S. government makes a profit off of printing all those Benjamins. There's a complicated financial trick involved when you make money, and we're not going explain it all here. It's called seniorage. We've done a few shows on it before on PLANET MONEY. But suffice it to say that the more money the United States government prints, the more profit the Treasury makes. In normal years, the government makes upwards of $30 billion a year. That's profit - $30 billion a year profit - by printing money.
ARNOLD: We also went back to talk to Richard Stratton, our friendly retired hasheesh dealer, and he says getting rid of the $100 bill probably wouldn't make that much of a difference in his old line of work. He might have to throw ten duffel bags full of money into an airplane at the end of a dark runway instead of three or four. But basically, he says, look, people would figure it out.
SMITH: They could use gold or diamonds, or, as any good drug dealer knows there's a 500-euro note. It is even more valuable than a $100 bill. You can put a million dollars in 500-euro notes in a purse.
ARNOLD: None of this is Richard Stratton's problem anymore. He says he's out of the business and his pockets are no longer stuffed with $100 bills.
STRATTON: Here's what you'll find...
ARNOLD: We got some 1s.
STRATTON: A few 1s, and that's it.
ARNOLD: Let me - we can count him out here. We got uh-oh, I'm dropping 1s. So now we've got 4 wrinkled bucks.
STRATTON: That's the story of my life now, that's for sure. Not exactly broke, but certainly not running around with stacks of $100 bills. And do I miss it? Yes.
(SOUNDBITE OF LORDE SONG, "MILLION DOLLAR BILLS")
SMITH: We always like to hear what you think of PLANET MONEY, so email us - email@example.com. Or if you see any unusual instances of the $100 bill out in the wild, tweet us a photo - @planetmoney. I wanted to specially thank Uri Berliner and Neal Carruth from NPR's business desk for lending us Chris Arnold today. Thanks.
ARNOLD: It's been fun. It's been real. And I would like to thank Jess Jiang, who did a great job producing the show today.
SMITH: Now that you're at the end the episode, check out some other NPR podcasts. We recommend Snap Judgment with Glynn Washington. You can find it on iTunes under podcasts. I'm Robert Smith.
ARNOLD: And I'm Chris Arnold. Thanks for listening.
(SOUNDBITE OF SONG, "MILLION DOLLAR BILLS")
LORDE: (Singing) There's nothing that's hurt like letting you go. It's like a bird eyes in the dark, dark, dark, dark.
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