A good counterfeit scare actually has some noteworthy aspects
'Some shops have stopped taking HK$1,000 notes and ATM users prefer taking HK$500 and HK$100 notes.'
SCMP, March 19
THIS IS MEANT to be news? Just when, may I ask, has any shop welcomed these HK$1,000 banknotes and since when have people not said unprintable things on finding one spit out at them by an ATM machine?
The last time it happened to me I said my unprintable things, took the offending piece of nasty yellow-coloured paper between my thumb and forefinger and marched inside the offending HSBC branch to the teller's queue.
'Excuse me,' I said when my turn came up. 'Your ATM machine has just given me this instead of cash. I don't know why it did that but could you take this thing back and give me some real money for it, please?'
I could not have been the first person to make this complaint. The teller recognised the problem instantly and solved it immediately, along with apologies to me. I didn't require the apologies but I did need the smaller denominations. Have you ever tried to pay off a taxi and found that you had only one of those puce yellow notes in your wallet? I did it once and I don't care to repeat the experience.
Few people really want these things. For ordinary day-to-day cash transactions, the HK$1,000 banknote is much too big a denomination. It is an invitation to trouble from merchants and has always been so, not just in this latest counterfeit scandal.
But some people obviously do seem to want it. The 2005 figures from the Hong Kong Monetary Authority (the latest available) say that in value terms the HK$1,000 banknote accounts for 53.6 per cent of the total banknote issue.
This, by the way, is up from 39.3 per cent in 1997, which says not only that these bills are in high demand but that this demand has grown.
Look at it another way. The first chart shows you that the number of them in circulation rose from fewer than 40 million in 2000 to more than 80 million in 2005. Take note that we are talking here not of the value of these banknotes, but of the number of them - 80 million individual pieces of yellow paper, 13 apiece for every adult member of our population. Who wants them?
The second chart gives you some further perspective on this. It shows you some comparable trends on an index basis in which the year 2000 equals 100. Thus the red line on top shows you that for every HK$100 worth of HK$1,000 banknotes in issue in 2000 there were HK$201 worth in 2005.
The blue line underneath represents the entire banknote issue. For every HK$100 in total banknote cash in circulation in 2000 there was HK$150 by 2005. Issuance of HK$1,000 banknotes has thus grown much faster than the overall banknote issue.
Then we get to the green line. It shows you gross domestic product in dollar of the day terms. For every HK$100 of GDP in 2000, we managed only HK$105 in 2005. This makes the blue and red lines on the chart look odd. Why did we need so much more cash in 2005 than in 2000 for every dollar of GDP we generated?
Perhaps it was because people stuffed cash into mattresses for a few years. Deflation during that period meant that the value of those banknotes actually rose and, with deposit rates at near zero, there was no reason to put the money in banks. The HK$1,000 banknote fits the purpose nicely - more money in the mattress with less bulge.
I think there is another explanation, however. The HK$1,000 banknote is the money launderer's banknote of choice in Hong Kong. Shuffling cash is a good way of hiding the proceeds of nefarious doings and, if you are doing nefarious doings in size, it helps to have a big banknote issued in size.
Would you care to comment, you people at the HKMA, about how our note-issuing banks seem so eager to accommodate money launderers? Could we have a police comment on this, too?
Whatever the explanation, I think a good counterfeit scare actually has some welcome aspects. It scares mattress money out of mattresses, it makes life more difficult for money launderers, and it reminds the powers that be that shopkeepers have always had good reason to shun a certain nasty form of yellow paper.