Key Takeaways

  • The US government spends about 9 cents to manufacture a single $100 bill, pocketing a 99.91% profit margin on physical currency creation.
  • Roughly 20 billion $100 bills circulate worldwide, forming the bulk of a $2.5 trillion interest-free loan from global cash holders to the US Treasury.
  • Eliminating high-denomination bills unilaterally does not stop crime; it merely hands seigniorage revenue to foreign central banks.
  • After the 2016 Paris attacks, European authorities stopped printing the €500 note, but criminal syndicates adapted by using €200 notes, $100 bills, and stablecoins.

The 99.91% Margin on Physical Money

Paper money is one of the most profitable products the United States produces. The math is simple. As Oliver Bullough points out, “It costs about 9 cents to print a $100 bill. You know, there's whatever 20 billion US dollar bills out there somewhere. So, if you think about that, each one costs 9 cents to print, you can see that there's a 99.91% margin on producing them.”

Central banks call this profit seigniorage. When a government prints physical currency, it trades paper that costs pennies for real goods, services, or foreign assets. When those bills leave American shores and sit in foreign safes, the economic benefit compounds. Bullough explains: “There's two and a half trillion US dollars out there somewhere. That's an interest-free loan to the US government, broadly understood, of two and a half trillion dollars.”

If someone in Buenos Aires, Kyiv, or Bogota keeps a stack of $100 bills under a floorboard, the US Treasury holds the value without paying interest on Treasury bonds. As long as the paper never returns to be redeemed, the loan never matures.

The Cartel Subsidy

High-denomination bills make life easy for criminal cartels and tax evaders. Stashing $1 million in $20 bills requires five heavy suitcases. Stashing $1 million in $100 bills fits inside a single backpack. Stashing that same sum in €500 notes took up barely more space than a shoebox.

Europe previously printed a €500 bill, known on trading desks and police blotters by a telling nickname. Bullough notes: “After the attacks on Paris in 2016, the Europeans announced that they weren't going to produce, they had used to have a €500 bill, which was referred to colloquially as the Bin Laden, because everyone had heard of it, but no one had seen it.”

European officials killed the €500 note to choke off terrorist financing and organized crime networks. Yet criminal operations did not shrink. Instead, cartels moved their liquidity into $100 bills, €200 notes, and digital rails like stablecoins.

This dynamic creates an uncomfortable economic reality. “The fact that the $100 bills are the favored tool of the cartels in Colombia and Mexico is very bad for Colombia and Mexico, but it's also quite profitable for the United States,” Bullough says.

The Trap of Unilateral Action

Policy advocates regularly urge the Federal Reserve to scrap the $100 bill to handicap global money laundering. The problem is game theory. No nation wants to act alone.

If Washington withdrew the $100 bill tomorrow, illegal syndicates would not suddenly abandon physical cash and pay corporate taxes. They would convert their holdings to €200 bills, Swiss francs, or British pounds. Bullough outlines the trap clearly: “If they stopped producing them, the Europeans would still be producing €100 and €200 banknotes, and then the Americans would then essentially lose out on the seigniorage to the Europeans and the criminal economy would get no smaller because they would just switch to using euros instead, and vice versa.”

Central banks remain stuck in a classic collective action dilemma. Until every major reserve currency issuer agrees to retire high-value physical notes simultaneously, printing large bills remains too profitable to abandon.

What to Do With This

Audit your business model for collective action traps where doing the virtuous thing unilaterally simply cedes margin to a competitor. If you plan to kill a legacy product or policy due to negative externalities, map where your customer demand will migrate before you pull the plug.