EZB to confiscate Euro 500 Notes?

THE EZB should exterminate Euro 500 Notes says BoA Analyst - "Its good for the economy"

"Significant evidence that much of the demand comes from criminals and tax evaders. The U.K.’s Serious Organized Crime Agency, for one, once claimed that 90% of all €500 notes were in the hands of organized crime."

Bank of America analyst Athanasios Vamvakidis is arguing that the European Central Bank should do a Seal Team Six and exterminate these controversial bills, the biggest denomination notes among the so-called G10 major currencies. Doing so, he argued in a research note released Tuesday, would weaken the euro, provide an economic boost, and allow the ECB to pull a fast one on gangsters who often park their ill-gotten wealth in these bills.

According to the BofA analyst, the “store of value” mindset is precisely the problem with the €500 notes. The evidence, Mr. Vamvakidis notes, is that the mega bills end up as “mattress money,” rarely seeing the light of day and existing as an alternative vehicle for holding savings. An ECB study itself suggests that only one-third of these notes in circulation are used for transaction purposes.

And there’s significant evidence that much of the demand comes from criminals and tax evaders. The U.K.’s Serious Organized Crime Agency, for one, once claimed that 90% of all €500 notes were in the hands of organized crime.

Spaniards used to call €500 notes “Bin Ladens.” Everyone knew the big denomination bills existed, the joke went, but no one had ever seen them. Now, Bank of America analyst Athanasios Vamvakidis is arguing that the European Central Bank should do a Seal Team Six and exterminate these controversial bills.

The reasoning is that the bills are rarely circulated and generally used by criminals.UK wholesalers no longer deal in them after the U.K.’s Serious Organized Crime Agency once claimed that 90% of all €500 notes were in the hands of organized crime.

Vamvakidis says the ECB could require that the bank notes be deposited in accounts or exchanged for smaller notes, but only to those who can prove that the source of their funds was legal. Then the ECB could use the profits for other purposes or distribute them to governments.

Source:  WSJ.