The economics of banknotes behind large banknotes

Why "500 dollar bills" rumors of the newspaper commentator Tang Xuepeng recently, the central bank strongly denied the release of the new version of the 500 Yuan of rumors, said never issued a new version of 500 Yuan, also did not issue a new version of 500 yuan denominated in renminbi plan. The "500 Dollar Bill" rumor is a very interesting phenomenon, the central bank repeatedly denied but rumors in various versions of "Evolution."　　This means that there is actually an not-exhausted driving force behind the rumours.　　Even if we do not see the government as an inflationary enthusiast-printing paper money that far exceeds the needs of the economy-even from a very neutral technical standpoint, we will find that the "money economics" brought by the paper system itself will induce the central bank to do so. Even when money is being transferred (via electronic transfer rather than cash), it appears as a mainstream form, "the core issue of the use of banknote economics is the allocation of banknotes, which in fact involves two aspects, one is the collocation of currency denomination, the other is the paper and coin structure in the currency system of banknotes. For example, in the fifth set of RMB coupon design, 2 yuan and 2 cents were canceled, which is the category of currency denomination. China's penny coins are almost out of circulation, which is the latter problem.　　The currency denomination is designed to make payments and change easier, and to increase the substitution of coins for banknotes, mainly in order to reduce the damage rate of small notes, thus reducing the level of the money supplies. Under the gold standard, the denomination is related to the weight of the material, 22 gold coins than 12 heavy, but in the paper system, printing is almost the same qualification, 50 Yuan paper money will not be less than 100 yuan note cost, so from the printing cost, the central bank printing a higher amount of money is a saving act, of course, This savings is not just the cost of paper printing, but also the broader social costs, such as the cost of banknote, transportation and storage. For example, under the same amount, a box of 100-dollar bills weighs only half the weight of 50 yuan, which saves weight and space for transportation.　　In fact, this principle can also be derived from the daily carrying of the wallet: people always first to spend a small amount of change, keep large notes, because it is more space. This will naturally deduce a paper-currency operating rule, that is, the "strong substitution" of large banknotes, which is also confirmed by the facts. The fifth set of currency issued increased 20 Yuan coupons, we found that the number of 10 Yuan coupons on a large scale contraction, a large number of exit from the circulation field. At the same time, the fifth set of currencies cancelled 2-dollar coupons and 2-point coupons, for the old version of the 2 yuan only to pay, it led to a sharp increase in the number of 1 Yuan coupons and 1 coupons, which actually increased the total number of cash in circulation, significantly increased the inventory and destruction of work pressure.　　The "strong substitution" of large currencies under the paper system is interlinked with the incentives of the central bank (and the banking system) to save costs or earn more seigniorage, so the issuance of higher denomination notes by the central Bank is regarded as an "incentive-compatible" act, a self-evident "yield". In the direction of monetary issue stimulating economic growth, the "strongSubstitution "actually implies rising currency denomination. In recent years, those who advocated the adoption of easy monetary policy have proposed a fundamental "abolition of the sub-currency", RMB implementation of Kok, Yuan two currencies, the main auxiliary units, so that the currency only in terms of interest, grain purchase price, oil and gas adjustment and so on as the book currency exists, which reminds us in the 70 's big inflation era about "cents"　　The fate of the discussion, however, the Volcker-led Federal Reserve in the form of austerity so that "strong substitution" does not turn into a spiral "currency large denomination of the radical movement." It may not be possible for the central bank to issue "500-dollar bills" in the future, but to issue a 200-dollar bill to test the market's response, but if the central bank does not implement a neutral currency stance, a higher bill is only a matter of time.