The $5,000 note

Nov 16, 2013 Editorial

People often talk about someone being pennywise and pound foolish. Ever since the government announced that it was introducing the $5,000 note there were queries whether the decision would not fuel inflation.
The powers that be, especially the Deputy Governor of the Bank of Guyana, said that the last hike in the value of the currency note was in 1999. On November 15, 1965 the currency notes that existed were in denominations of 1, 5, 10, and 20 dollars.
Between 1988 and 1992 the government introduced two new denominations—the $100 and $500. Inflation was riding high and pretty soon people were walking with a huge bulk of notes to pay simple bills. Guyanese were still refusing to accept a more safe means of conducting business, one that meant minimum cash transactions.
By 1999 Guyana’s currency notes were the 20, 100, 500, and 1000 dollars. New banknotes of 100 and 1000 dollars were issued on 29 March 2006. Increase in the value of the currency note is merely to reduce the volume of notes in circulation and according to the Deputy Governor of the Bank of Guyana, this had nothing to do with inflation. He made it a point to point out that the last note to be introduced came more than a decade ago.
Be that as it may one is left to wonder about the notes in the developed world. The United States has not had a note larger than the $100 for as long as Guyanese could remember. If indeed there was a larger note that has been reduced from circulation.
From the look of things even the US$100 note seems to be heading to the disused pile. For one, many entities are skeptical about accepting it because of the extent of global forgery; and besides the people for the most part use plastic for transactions that are relatively small.
Guyanese, on the other hand, are slow to move away from cash transactions. Perhaps they find it time consuming to go to stand in a line at a commercial bank to withdraw cash and that in itself should be a deterrent to cash transactions but it surely is not.
Just last week, a woman left a commercial bank with a quantity of cash; she was followed by two men and despite her efforts to seek protection in a nearby pharmacy, one of the men proceeded to rob her at gunpoint. He escaped on a waiting motorcycle.
The decision to print the larger denomination would merely serve to encourage people to remain cash-oriented. One would have thought that in the wake of calls by the police and the various measures being sought to introduce plastic, the government would have begun to take measures to make credit and debit cards the currency of choice.
The decision makers would have been advised to concentrate on the money in circulation. They have announced that come December 9, this year they would trot out the new currency. Normal economics would see an equivalent of currency being removed from circulation to facilitate the new notes. The Central Bank may do well to remove the coins from circulation because most of them are now useless.
There are some $850 million in coins in circulation. The value of the $20 notes and others in circulation amount to $55.7 billion. If the new currency is not in response to inflation then surely a few billion dollars of these notes would be removed from the system.
There is the view that people bent on a life of crime will be inspired to increased activity. For one the weight of the money would not be a problem because they would be running with fewer notes. It is indeed unfortunate that the decision to introduce the new note did not take everything into consideration.
Money launderers would be given a new lease to store their currency. In fact, one must wonder whether the new notes are not intended to make life for the money launderer in the absence of the anti-money laundering legislation.

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The $5,000 note

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