U.S. authorities decided to print new $100 bills
The official and simplest answer lies on the surface: in the United States, forcible seizure of banknotes is not accepted. All money ever issued, even rare two-dollar bills, can be exchanged at any American bank at face value. And around the world, both old green bills and new pinkish twenties and fifties are still accepted today.
Thus the ceremony of "Franklin's transformation" will be staged with pomp and attended by the country's top financiers – Treasury Secretary Timothy Geithner, Treasurer Rosa Rios, and Fed Chairman Ben Bernanke. The bill, according to authorities, will become even more secure and open a new chapter in the fight against counterfeiting, but it will not solve the main state problems.
Yet hypothetically, this event could become not only a starting point for the recovery of the American economy, but also a real tragedy for holders of "green" cash.
The hypothesis is, of course, extravagant, but might it not happen that one fine day the U.S. authorities suddenly take and refuse to exchange old $100 bills that have accumulated abroad for new notes? Much like how they once abandoned the gold standard and stopped exchanging dollars for the despised metal. For Washington has a reason to carry out such an action.
Ten years ago, experts calculated that about 80% of U.S. cash circulates outside the United States. The situation has changed little since then. Meanwhile, the U.S. national debt, which exceeded the $12 trillion mark at the end of last year, and the budget deficit ($1.4 trillion in 2009) are growing rapidly. At the same time, the Fed pumped more than a trillion dollars into the economy, which are backed by nothing – they were backed by the printing press.
Under these circumstances, halting the repatriation of old banknotes could significantly help solve the issue of excess liquidity. And it would leave Russian (and not only) holders of mattress "cash" empty-handed. As would banks that have accumulated such holdings.
Is such a prospect realistic in practice?
"Theoretically, such a thing could have economic motives, but it would lead to trade wars. In addition, the question of China buying U.S. debt would arise, which would lead to the collapse of this market," believes Vladimir Rozhankovsky, managing director of the MidCap Sickle and Hammer fund. "Even if this utopian idea of refusing to accept old banknotes were implemented, the U.S. national debt would not disappear anywhere," says Mikhail Khazin, president of the Neokon company. At the same time, political risks remain the main deterrent.
All true. But excess liquidity, national debt, and budget deficit inevitably form a vicious circle that cannot be broken without losses. As a result, many experts believe that sooner or later Americans will have to sacrifice either their dollar, by devaluing it, or their reliability rating – and declare default. Experts we interviewed also make more exotic assumptions, such as the breakup of America, but that looks more like a political thriller plot.
In any case, given the high level of globalization, the consequences of American problems caused by the crisis, whether it be the threat of default or simply exchange rate fluctuations and inflation exported from the U.S. around the world, will have to be sorted out by the whole world. But for now, the U.S. National Debt Clock service will continue to increase the level of U.S. debt online. At the time of going to press, it exceeded $12.5 trillion.