Applebaum: America’s most profitable export is money

America's most profitable export product is not oil or medicine or Hollywood movies or Boeing airplanes. It is a small green piece of paper with Benjamin Franklin on the front.

Last year, the United States exported $65.3 billion of its currency - mostly $100 bills.

The world needs an international currency, and the dollar is the obvious candidate because the United States, for all its economic troubles, remains the hub of the global economy. U.S. government debt is the world's most popular investment, and the bonds can be purchased only with dollars. Oil is the world's dominant trade good, and it also is priced and sold in dollars. Much like Facebook, everybody uses dollars because everybody uses dollars.

The popularity of paper dollars, however, requires a little more explanation. Most modern money is notional: Wealth is stored on computers; payments are made electronically.

I cannot remember the last time I owned or even held a $100 bill.

Yet foreign demand for the bills known as Benjamins has surged even as the domestic use of dollars has declined. The number of $100 bills in circulation roughly doubled between 2008 and 2017, and experts estimate a vast majority are in foreign hands.

Remarkably, the Federal Reserve recently reported that at the end of 2017, the number of $100 bills in circulation exceeded the number of $1 bills for the first time.

The available evidence suggests large numbers of $100 bills are stuffed in mattresses or other hiding places - particularly in nations where people lack confidence in the value of the domestic currency, or the integrity of the financial system, or the safety of private property. Dollars are hoarded like diamonds, except dollars are easier to spend.

Even America's enemies hoard American money: U.S. soldiers searching one of Saddam Hussein's palaces in 2003 found about $650 million in fresh $100 bills.

The $100 bill is the preferred currency for illegal transactions: gambling, drug deals, sales of weapons. The economist Barry Eichengreen, the nearest thing to a biographer of the dollar, has noted that movie villains usually demand payment in greenbacks.

There is obvious efficiency in using large denominations for the types of transactions where payment must be delivered in a suitcase. But the 200 euro note, considerably more valuable than the $100 bill, remains the least common euro note. Criminals want dollars.

Still, it is not clear why demand has doubled. The collapse of the Soviet Union drove a surge in demand for U.S. currency in the 1990s. Nothing comparable has happened recently. And the dollar would appear to face growing competition from the euro, the currency of a region with a larger total economic output than the United States, and the yuan, the currency of a country whose economy is on pace to soon surpass the United States'.

Some experts predict the dollar's days of dominance are numbered. But experts have been making that prediction for half a century. Meanwhile, the United States continues to crank the printing presses at its plants in Washington and Fort Worth, Texas, and to distribute dollars from licensed warehouses in financial centers including London, Frankfurt, Germany, and Singapore.

Printing dollars, after all, is a very profitable business. Ranked by value, greenbacks finished second on the list of America's most valuable export products, just behind refined petroleum. But exporting money is much more profitable. It costs the federal government around 14 cents to produce a $100 bill, and a few more cents to send it overseas.

In exchange for each of those bills, the United States gets an interest-free loan of $100. At the end of 2018, foreign holdings of American currency totaled $773.9 billion.

Demand for American currency hones a double-edged sword. By driving up the exchange value of the dollar, it allows Americans to buy foreign goods and services more cheaply. But that makes American exports more expensive for foreign buyers.

So far, it is a trade the United States remains more than happy to make.

Binyamin Appelbaum is an editorial writer for the New York Times.

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